for the fiscal year ended june 30, 2015 - financeky of the controller/2015cafr.pdf · report for...

Comprehensive Annual Financial Reportfor the Fiscal Year Ended June 30, 2015

Commonwealth of Kentucky Comprehensive Annual Financial Report for the Fiscal Year Ended June 30, 2015

Matthew G. Bevin, Governor

Prepared by:Finance and Administration CabinetWilliam M. Landrum III, Secretary

Offi ce of the ControllerEdgar C. Ross, Controller

Statewide Accounting ServicesDonald Sweasy, Executive Director

The cost of printing was paid from state funds pursuant to KRS 57.375Printed on recycled paper

Matthew G. BevinGovernor

COMMONWEALTH OF KENTUCKY

CONTENTS INTRODUCTORY SECTION

Letter of Transmittal ......................................................................................................................................................... 2 Controller’s Letter ............................................................................................................................................................ 8 Certificate of Achievement for Excellence in Financial Reporting ................................................................................... 9 Organizational Chart and List of Principal Officials ....................................................................................................... 10

FINANCIAL SECTION Report of the Auditor of Public Accounts ....................................................................................................................... 12 Management’s Discussion and Analysis ......................................................................................................................... 17 BASIC FINANCIAL STATEMENTS Government-Wide Financial Statements Statement of Net Position ........................................................................................................................................ 27 Statement of Activities ............................................................................................................................................. 28 Governmental Funds Financial Statements

Balance Sheet-Governmental Funds ....................................................................................................................... 31 Reconciliation of the Balance Sheet-Governmental Funds to the Statement of Net Position .................................. 32 Statement of Revenues, Expenditures, and Changes in Fund Balances ................................................................... 33 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances- Governmental Funds to the Statement of Activities ............................................................................................. 34 Proprietary Funds Financial Statements Statement of Fund Net Position ............................................................................................................................... 36 Statement of Revenues, Expenses, and Changes in Fund Net Position ................................................................... 38 Statement of Cash Flows .......................................................................................................................................... 40 Fiduciary Funds Financial Statements Statement of Fiduciary Net Position-All Fiduciary Funds ....................................................................................... 43 Statement of Changes in Fiduciary Net Position-All Fiduciary Funds .................................................................... 44 Component Units Financial Statements Statement of Net Position ........................................................................................................................................ 46 Statement of Activities ............................................................................................................................................. 48 Notes to Financial Statements ...................................................................................................................................... 53 REQUIRED SUPPLEMENTARY INFORMATION OTHER THAN MANAGEMENT’S DISCUSSION AND ANALYSIS Schedule of Revenues, Expenditures, and Changes in Fund Balances Budget and Actual (Budgetary Basis)-General Fund ............................................................................................. 140 Budget and Actual (Budgetary Basis)-Budgeted Special Revenue Funds ............................................................. 144 Notes to Required Supplementary Information Budgetary Reporting .............................................................................................................................................. 154 Budgetary Basis vs. GAAP .................................................................................................................................... 155 Infrastructure Assets Reported Using the Modified Approach .............................................................................. 156 Entity Risk Pools-Claims Development Information ............................................................................................. 160 Schedule of Contributions - Pensions…………………………………………………………………………… . 162


Schedule of Changes in Net Pension Liability and Related Ratios……………………………………… ............ 172 Schedule of Commonwealth’s Proportionate Share of the Net Pension Liability ……………………………… . 173 OTHER SUPPLEMENTARY INFORMATION Combining and Individual Fund Statements and Schedules – Non-Major Funds Non-Major Governmental Funds Combining Balance Sheet ...................................................................................................................................... 178 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances .............................................. 180 Schedule of Fund Activities Schedule of Revenues by Source-General Fund ................................................................................................... 183 Schedule of Expenditures by Function, Cabinet, and Object-General Fund ......................................................... 184 Schedule of Revenues and Expenditures by Type-Transportation Fund ............................................................... 186 Internal Service Funds Combining Statement of Fund Net Position .......................................................................................................... 188 Combining Statement of Revenues, Expenses and Changes in Fund Net Position ................................................ 190 Combining Statement of Cash Flows ..................................................................................................................... 192 Capital Assets Capital Assets Used in the Operation of Governmental Funds by Source ............................................................. 195 Capital Assets Used in the Operation of Governmental Funds Schedule by Function ......................................................................................................................................... 196 Capital Assets Used in the Operation of Governmental Funds Schedule of Changes by Function ...................................................................................................................... 198 Pension (and Other Post Employment Benefit) Trust Funds Combined Statement of Fiduciary Net Position ..................................................................................................... 200 Combined Statement of Changes in Fiduciary Net Position .................................................................................. 201 Combining Statement of Fiduciary Net Position-Pension and OPEB Trust Funds – Pension Funds .................... 202

Combining Statement of Changes in Fiduciary Net Position-Pension and OPEB Trust Funds-Pension Funds ................................................................................................................................................................ 204

Combining Statement of Fiduciary Net Position-Insurance Funds ........................................................................ 206 Combining Statement of Changes in Fiduciary Net Position-Insurance Funds ..................................................... 208 Agency Funds Combining Statement of Fiduciary Net Position ................................................................................................... 211 Combining Statement of Changes in Assets and Liabilities .................................................................................. 212 Non-Major Component Units-Combining Combining Statement of Net Position-Non-Major Component Units ................................................................... 214 Combining Statement of Activities-Non-Major Component Units ........................................................................ 215 Non-Major Component Units-Authorities Combining Statement of Net Position-Authorities ................................................................................................ 218 Combining Statement of Activities-Authorities ..................................................................................................... 222 Combining Statement of Cash Flows-Authorities .................................................................................................. 225 Non-Major Component Units-Universities, Colleges, and Related Entities Combining Statement of Net Position-Universities, Colleges, and Related Entities ............................................. 228 Combining Statement of Activities-Universities, Colleges, and Related Entities .................................................. 230


STATISTICAL SECTION

Fund Balances – Governmental Funds- For the Last Ten Fiscal Years .................................................................................................................................... 234 Changes in Fund Balance-Governmental Funds- For the Last Ten Fiscal Years .................................................................................................................................... 236 Net Position by Component For the Last Ten Fiscal Years .................................................................................................................................... 238 Government-Wide Expenses, Program Revenues, and Net (Expense)/Revenue For the Last Ten Fiscal Years .................................................................................................................................... 240 Personal Income Tax Information-Calendar Years 2004 and 2013 .............................................................................. 244 Assessed and Estimated Actual Value of Taxable Property For Calendar Years 2005-2014 .................................................................................................................................. 247 Property Tax Levies and Collections For Calendar Years 2005-2014 .................................................................................................................................. 247 Ratios of Outstanding Debt by Type for the Last Ten Fiscal Years .............................................................................. 248 University and College Revenue Bond Coverage for the Last Ten Fiscal Years .......................................................... 250 Top Ten Manufacturers/Supportive Service Firms ....................................................................................................... 250 Demographic Statistics for the Calendar Years 2005-2014 .......................................................................................... 250 Sources of Personal Income-For Calendar Years 2005-2014........................................................................................ 251 Operating Indicators By Function for the Last Ten Fiscal Years .................................................................................. 252 Capital Asset Statistics By Function for the Last Ten Fiscal Years .............................................................................. 253 Operating Information State Government Employees by Function Last Ten Fiscal Years ........................................... 254

5

INTRODUCTORY SECTION

6

Matthew G. Bevin Governor

Commonwealth of Kentucky Finance and Administration Cabinet

OFFICE OF THE SECRETARY Room 383, Capitol Annex

702 Capital Avenue Frankfort, KY 40601-3462

(502) 564-4240 Fax (502) 564-6785

William M. Landrum III

Secretary

December 11, 2015 The Honorable Matthew G. Bevin, Governor Members of the Kentucky General Assembly Citizens of Kentucky

INTRODUCTION Section 48.800 (3) of the Kentucky Revised Statutes (K.R.S.) requires the Finance and Administration Cabinet to submit a complete report of the financial transactions of the preceding year and of the financial condition of the Commonwealth as of the end of that fiscal year. In accordance with this statute, it is my pleasure to transmit to you the Comprehensive Annual Financial Report of the Commonwealth of Kentucky for the Fiscal Year Ended June 30, 2015. This report is prepared by the Finance and Administration Cabinet, Office of the Controller, Office of Statewide Accounting Services, which assumes responsibility for the accurate, complete, and fair presentation of the data contained herein. The information presented fully describes the Commonwealth’s financial condition and results of operations of the primary government and component units for which it is financially accountable. All appropriate disclosures necessary for the reader to gain the maximum understanding of Kentucky’s financial affairs are included. The accompanying financial statements have been audited by the Office of the Auditor of Public Accounts of the Commonwealth of Kentucky. Their examination was conducted in accordance with auditing standards generally accepted in the United States of America, and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States. The independent auditor concluded that the Commonwealth of Kentucky's financial statements for the year ended June 30, 2015, are fairly presented in conformity with Generally Accepted Accounting Principles (GAAP). The report of the independent auditor appears elsewhere in this report.

PROFILE OF THE COMMONWEALTH OF KENTUCKY

The Reporting Entity and Its Services

This report includes all funds and component units for which the Commonwealth is financially accountable, based on criteria established by the Governmental Accounting Standards Board’s (GASB) Statement 14 as amended by GASB 39 and GASB 61. The component units which are blended into the Commonwealth’s primary government and function as actual parts of the Commonwealth are: the State Property and Buildings Commission, Kentucky Asset/Liability Commission, Turnpike Authority of Kentucky, Board of Agriculture, Kentucky Retirement System, Judicial Form Retirement System, Kentucky Public Employees’ Deferred Compensation Authority, Kentucky Tobacco Settlement Trust Corporation, Kentucky Teachers’ Retirement System, Kentucky School Facilities Construction Commission, and Kentucky Gas Pipeline Authority.

7

The Commonwealth’s discretely presented component units are: the Bluegrass State Skills Corporation, Kentucky Lottery Corporation, Kentucky River Authority, Kentucky State Fair Board, Kentucky Center for the Arts Corporation, Kentucky Educational Television Authority, Kentucky Economic Development Finance Authority, Kentucky Higher Education Assistance Authority, Kentucky Higher Education Student Loan Corporation, Kentucky Housing Corporation, Kentucky Public Transportation Infrastructure Authority, Kentucky Infrastructure Authority, Kentucky Artisan Center, Kentucky Agricultural Finance Corporation, Kentucky Grain Insurance Corporation, Kentucky Local Correctional Facilities Construction Authority, Kentucky Horse Park Foundation, Kentucky Council on Postsecondary Education, Kentucky Community Technical College System, and the eight state-supported universities. Additional detailed information pertaining to Commonwealth’s component units is located within the Financial Section (particularly Note 1) of this report.

The Commonwealth and Its Services

Located in south central United States along the west side of the Appalachian Mountains, Kentucky was once a part of Virginia. After its split with Virginia, Kentucky retained its "commonwealth" (meaning government based on the consent of the people) status and adopted its Constitution in 1792. The Commonwealth provides the full range of services contemplated by statute, including economic development, educational and human services, energy and natural resources management, law enforcement, correctional and public protection services, transportation, public improvements, and general legislative, administrative, and judicial services. The Commonwealth's chief executive is the Governor who is popularly elected every four years and may serve for two terms. Policies are directed through the various Cabinets. The General Assembly, or state Legislature, has two components: the Senate and the House of Representatives. The Senate has 38 members who are elected to four-year terms and the House has 100 members who are elected to two-year terms. The Legislature meets annually and has the power to enact all laws, subject to limits imposed by the state constitution. Revenue-raising issues must be initiated in the House. All other bills may be introduced by either the House or the Senate.

Budgetary Controls

The Commonwealth uses a biennial budget to assist with planning and control duties. Budgetary control is maintained at the budget unit level and is described in the notes to the Required Supplementary Information. Encumbrance accounting is utilized to insure the availability of funding before contracts are finalized. Contracts which result in overruns of available balances are not released until budget revisions are approved. Outstanding encumbrances for long-term construction projects in the Transportation Fund and the Capital Projects Fund are included in assigned fund balance. Encumbrances in all other funds lapse at the end of the fiscal year.

ECONOMIC CONDITION AND OUTLOOK

National Economy As the conclusion of the second quarter of fiscal year 2016 approaches, the economy appears to be moving along at a moderate and steady pace. As of October, unemployment has fallen to 5.0 percent nationwide, half of what it was at its recession peak of 10.0 percent exactly six years prior. Despite the low unemployment, inflationary pressures are all but non-existent as oil prices have fallen under $45 a barrel. Real GDP growth was a tepid 2.1 percent in the first quarter of FY16, affected by greater imports and slowing manufacturing attributed in large part to the relatively strong US Dollar. The real GDP estimates for the final quarters of FY15 were revised upward, with the third quarter of that fiscal year revised upward from contraction to expansion. Real average hourly earnings increased 2.4 percent in October 2015 from the previous year, which is decent growth but not outstanding. Real personal consumption expenditures grew at a 1.2 percent annualized rate in the same month. Consumers are taking advantage of low gasoline prices, helping increase overall consumer spending and travel. Hotels are reporting all-time records in occupancy rates and revenue, and automobile sales are at an annualized rate of 18.2 million, a 12-year high.

8

As a result of the low unemployment and consistent economic growth, the Federal Reserve appears ready to raise its federal funds rate target for the first time since the financial crisis. The bond market is anticipating this change of policy at the Federal Open Market Committee’s (FOMC) December meeting, and the dollar has appreciated against most other currencies as well. Despite the FOMC’s apparent confidence, it remains far from clear that this is the correct policy decision. The price index for personal consumption expenditures excluding food and energy grew by less than 0.1 percent from September to October, indicating a rate of inflation well below the FOMC’s supposed 2 percent target. The labor force participation rate fell in October to a rate not seen since the late 1970s. This is in large part due to the demographics of an aging workforce but also may indicate other underlying economic problems as people give up looking for work or hold out for higher wages. Faster wage growth and better job prospects could help increase participation rates. As such, there appears to be slack remaining in the US economy that makes a shift to more contractionary monetary policy far from being obviously necessary. Overall, the outlook for the remainder of the fiscal year is positive. Real GDP is forecast to grow over the final two quarters, and growth for FY16 is projected at 2.4 percent over FY15, which is lower than the 2.7 percent growth seen in the prior fiscal year. Growth is projected to be 3.0 percent over FY17, which would be the fastest rate of US economic growth in over a decade. The price of Brent crude oil is projected to move over $50/barrel in coming months as growth picks up. Personal incomes are projected to grow 4.2 percent in this fiscal year, and grow at faster rates in the future.

Kentucky Economy

Low energy prices are both a blessing and a burden for Kentucky in this fiscal year. Plentiful natural gas at low prices has put coal at a significant disadvantage and mining output and employment have fallen as a result. But low gasoline prices have meant a real increase in consumers’ disposable incomes, increasing miles driven on Kentucky interstates, boosting tourism and hotel revenue, and driving greater demand for automobiles which are manufactured in Kentucky. While the US has seen tepid manufacturing employment growth in recent years, Kentucky’s has been more robust as the automobile manufacturers in the state have expanded to meet domestic demand for vehicles. In November, one local automobile plant announced an additional 2,000 jobs as it was awarded production of a new line of light truck. Manufacturing employment growth in FY16 in Kentucky is projected to be eight times the rate of the US as a whole, a trend that is expected to continue into the next two fiscal years. Economic growth overall in Kentucky is projected to continue through FY16 roughly in line with the national economy. The unemployment rate in October measured at 4.9 percent, just below the US average. Kentuckians’ personal incomes are forecast to grow 4.9 percent over this fiscal year, a faster rate than has been seen since 2008. Robust wage and salary growth is forecast to maintain for the coming fiscal years as well. Kentucky’s index of leading economic indicators, as reported by the Philadelphia Federal Reserve, has remained high relative to the US average. This suggests that growth will be positive in several areas over the next several months. The housing market in Kentucky seems to be turning the corner as the rate of growth of new housing permits has increased and construction employment has likewise increased. Single-family building permits increased 13 percent in the first quarter over the previous fiscal year. Home sales in several Kentucky metropolitan statistical areas are also seeing double digit annualized growth. Besides an unusually harsh winter in the short-term, perhaps the greatest threat to the Kentucky economy in the medium term is a slowdown in manufacturing or an increase in interest rates deterring borrowing and investment. As such, there are concerns locally about the FOMC’s probable increase of the federal funds rate target in December. An increase in gasoline prices would also curb the growth in automobile manufacturing, tourism, and hospitality. While there are always risks, the current outlook for Kentucky remains strong.

9

Long-Term Financial Planning Debt financing of the Commonwealth is classified as either appropriation supported debt or non-appropriation supported debt. Appropriation supported debt carries the name of the Commonwealth and is either a general obligation of the state or a lease revenue obligation of an issuing agency created by the Kentucky General Assembly to finance various projects subject to state appropriation for all or a portion of the debt service on the bonds. Non-appropriation or moral obligation debt carries the name of the Commonwealth for the benefit and convenience of other entities within the state. This type of indebtedness is a special obligation of the issuer, secured and payable solely from the sources pledged for the payment thereof and does not constitute a debt, liability, obligation, or pledge of the faith and credit of the Commonwealth.

Debt Administration The amount of debt service for general bonded debt, the ratio of this amount to total expenditures for general governmental functions, and the amount of debt per capita are useful indicators to citizens, investors, and management regarding the Commonwealth’s debt position. The data for 2015 are:

Ratio to Total Debt Service (thousands) General Governmental Expenditures Debt Per Capita General Bonded Debt $1,028,023 4.2 % $1,395 No general obligation bonds were authorized or outstanding at June 30, 2015. A detailed analysis of the Commonwealth’s debt issuance during the fiscal year ended 2015 is presented in Note 15.

Major Initiatives Fiscal year 2015 was the first fiscal year of the Commonwealth’s 2014-16 biennial budget period. The Commonwealth of Kentucky is one of the few states that enact a biennial budget in an even-numbered year; meaning that the fiscal year 2015 budget was enacted in the 2014 Regular Session of the Kentucky General Assembly. General Fund revenue growth was 5.3 percent, resulting in a $139 million General Fund surplus. Road Fund revenues decreased by 2.2 percent which resulted in a $6.3 million budget shortfall. In fiscal year 2015, General Fund spending increased by 3.5 percent, and Road Fund spending increased by 6.2 percent. The Road Fund revenue shortfall was resolved primarily through unexpended Road Fund budgets. The General Fund 3.5 percent spending growth was focused in the three areas: elementary and secondary education (36 percent of the spending growth), public pensions (30 percent of the spending growth), criminal justice (12 percent of the growth), and the Medicaid program (11 percent of the spending growth). Outside those areas, most other areas of spending declined for the seventh consecutive fiscal year. Some areas of the government have incurred up to 41.5 percent in General Fund budget reductions since fiscal year 2008. Despite Road Fund revenue growth of just 2.2 percent, spending from the Road Fund increased by 6 percent primarily due to the schedule of major road project expenditures, which occur over a multi-year period. Fiscal year 2015 marked the first year of a 30-year financing plan for the unfunded liability of the Kentucky Employees’ Retirement System. An additional $200 million was added to the employer contribution toward that system, about half of which was from the General Fund. This additional spending fully funded the actuarially required contribution. The Commonwealth continued to implement past reforms to address the unfunded liability of its pension systems through the restructuring future employee benefits to a hybrid-cash balance plan was put in place for all new employees which will mitigate the cost of future pension liabilities. Fiscal year 2015 was the fifth year of a six-year plan to sufficiently pre-fund the Teachers’ Retirement System medical costs, involving additional financial participation from active school district employees, the 173 Kentucky school districts, existing retirees under age 65, and the Commonwealth.

10

Fiscal year 2015 was the fourth year of implementation for two major policy initiatives: the statewide implementation of managed care in the Medicaid program, and the implementation of several of the reforms enacted in 2011 affecting Corrections and the revision in the controlled substances portion of the penal code. The movement of Medicaid’s non-waiver populations into managed care resulted in General Fund cost avoidance of over $160 million in fiscal year 2015. Due to the implementation of reforms in the Corrections area, the inmate population growth since fiscal year 2011-12 has been flat over the four years since reform efforts were enacted. The Commonwealth’s capital program for the 2014-16 biennial period included $1.5 billion in bond funded projects. That amount is about the average for the previous seven biennial budgets. Almost 80 percent of the new funding was focused on the Commonwealth’s nine public postsecondary education institutions. Water and sewer infrastructure projects and local school construction reflected about 16 percent of the new funding. The Kentucky Community and Technical College system, the Commonwealth’s two-year degree granting system, received authority to finance $145.5 million in bond projects for 16 capital projects that will be supplemented by matching funds from the system of another $48.5 million. This $194 million capital investment represents the first significant capital investment in the system since the 2006-08 biennial budget, and the first use of fee-supported bonds to finance capital projects for the system. Fiscal year 2015 was the third year that the Commonwealth implemented the elements of the federal Affordable Care Act that permitted the expansion of eligibility for the Medicaid program to individuals whose income is up to 138 percent of the poverty level, and its own Health Benefit Exchange. By the end of fiscal year 2015, over 400,000 Kentuckians were enrolled in the “expanded” Medicaid program.

FINANCIAL INFORMATION

The Accounting System The Commonwealth’s financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). Additional discussions of the various funds and how they are reported are located in the Management Discussion and Analysis (MD&A) section of this report. In developing and operating the Commonwealth’s accounting system, management of the Commonwealth placed emphasis on the adequacy of internal accounting controls. The comprehensive internal control framework is designed to provide reasonable, but not absolute, assurance that assets are safeguarded against loss from unauthorized use or disposition, and that financial records are reliable for preparing GAAP financial statements that are free from material misstatement and maintaining accountability for assets. The concept of reasonable assurance recognizes that the cost of internal controls should not exceed the benefits likely to be derived from their use, and that such cost-benefit evaluation requires estimates and judgments by management. All internal control evaluations occur within this framework.

11

OTHER INFORMATION

Certificate of Achievement for Excellence in Financial Reporting

The Government Finance Officers Association of the United States and Canada (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the Commonwealth of Kentucky for its Comprehensive Annual Financial Report for the fiscal year ended June 30, 2014. This is the 28th consecutive year the Commonwealth has received this prestigious award. In order to be awarded a Certificate of Achievement, a government must publish an easily readable and efficiently organized comprehensive annual financial report. This report must satisfy both generally accepted accounting principles and applicable legal requirements.

A Certificate of Achievement is valid for a period of one year only. We believe that our current comprehensive annual financial report continues to meet the Certificate of Achievement Program’s requirements and we are submitting it to the GFOA to determine its eligibility for another certificate.

Acknowledgments

The preparation of this report could not have been accomplished without the cooperation of all branches and agencies of the Commonwealth. The professionalism demonstrated by the staffs of the Finance and Administration Cabinet’s Office of Statewide Accounting Services, the Kentucky Transportation Cabinet’s Division of Graphic Design and Printing, as well as the Office of the Auditor of Public Accounts, is especially noteworthy. Their combined dedication made the publication of this report possible.

Respectfully submitted, William M. Landrum III, Secretary Finance and Administration Cabinet

12

KentuckyUnbridledSpirit.com An Equal Opportunity Employer M/F/D

11

FINANCIAL SECTION

12

To the People of KentuckyThe Honorable Matthew G. Bevin, GovernorWilliam M. Landrum III, SecretaryFinance and Administration Cabinet

Independent Auditor’s Report

Report on the Financial Statements

We have audited the accompanying financial statements of the governmental activities, the business-type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the Commonwealth of Kentucky, as of and for the year ended June 30, 2015, and the related notes to the financial statements, which collectively comprise the Commonwealth’s basic financial statements as listed in the table of contents.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express opinions on these financial statements based on our audit. We did not audit the financial statements of some component units and funds that comprise the Commonwealth of Kentucky. Those financial statements were audited by other auditors whose reports thereon have been furnished to us, and our opinion, insofar as it relates to the amounts included for those component units and funds is based solely on the reports of the other auditors. Those component units and funds were:

Certain portions of the Governmental Funds including:

Debt Service Fund - Turnpike Authority of KentuckySpecial Revenue Fund - Turnpike Authority of Kentucky

Certain portions of the Proprietary Funds including:

Within the Insurance Administration Fund:o Kentucky Coal Workers’ Pneumoconiosis Fundo Kentucky Workers’ Compensation Fundo Petroleum Storage Tank Environmental Assurance Program

Certain portions of the Internal Service Funds within the Risk Management Fund including:

State Workers’ Compensation Program Transportation Cabinet’s Self-Insured Workers’ Compensation Trust Program

Certain Fiduciary Funds including:

Kentucky Retirement System Kentucky Teachers’ Retirement SystemJudicial Form Retirement System Kentucky Public Employees’ Deferred Compensation Authority

13

To the People of KentuckyThe Honorable Matthew G. Bevin, GovernorWilliam M. Landrum III, SecretaryFinance and Administration CabinetPage 2

Component Units:

Bluegrass State Skills Corporation Kentucky Horse Park Foundation, IncorporatedKentucky Center for the Arts Corporation Kentucky Housing CorporationKentucky Economic Development Finance Authority Kentucky Infrastructure AuthorityKentucky Educational Television AuthorityKentucky Higher Education Assistance Authority

Kentucky Local Correctional Facilities Construction Authority

Kentucky Higher Education Student Loan Corporation Kentucky Lottery CorporationKentucky State Fair Board

Component Units - Colleges and Universities and related entities:

University of Kentucky University of LouisvilleEastern Kentucky University Kentucky State UniversityMorehead State University Murray State UniversityNorthern Kentucky University Western Kentucky UniversityKentucky Community and Technical College System Kentucky Council on Postsecondary Education

Those financial statements reflect total assets and revenues of the government-wide financial statements and total assets and revenues or additions of the fund financial statements as follows:

Government-Wide Financial Statements: Percent of Assets Percent of RevenuesPrimary Government - Governmental Activities 1.09 % .04 %Primary Government - Business-Type Activities 36.97 % 4.51 %Component Units 92.32 % 98.58 %

Fund Financial Statements:Governmental Funds - Non-Major Funds 33.28 % .91 %Proprietary Funds - Business-Type Activities - Enterprise Funds 36.75 % 4.50 %Proprietary Funds - Governmental Activities - Internal Service Funds 3.80 % 11.38 %Fiduciary Funds - Pension and Insurance Trust Funds 100 % 100 %Component Units 92.32 % 98.58 %

We conducted our audit in accordance with auditing standards generally accepted in the United States of America, and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in thecircumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.

14


Opinions

In our opinion, based on our audit and the reports of the other auditors, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the Commonwealth of Kentucky, as of June 30, 2015, and the respective changes in financial position and, where applicable cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America.

Emphasis-of-Matter

Change in Accounting Principle

As discussed in Note 2, the Commonwealth implemented Governmental Accounting Standards Board Statement (GASB) No. 68, Accounting and Financial Reporting for Pensions, and GASB No. 71, Pension Transition for Contributions Made Subsequent to the Measurement Date - an amendment of GASB Statement No. 68, during fiscal year 2015. The implementation of these standardsresulted in a prior period adjustment to the Commonwealth’s Net Position at July 1, 2014. Our opinion is not modified with respect to this matter.

Other Matters

Required Supplementary Information

Accounting principles generally accepted in the United States of America require that the Management’s Discussion and Analysis on pages 17 through 24, budgetary comparison schedules and corresponding notes on pages 140 through 155, and information about infrastructure assets reported using the modified approach on pages 156 through 159, claims development information for entity risk pools on pages 160 and 161, Schedule of Contributions on page 162 through 170, and the Proportionate Share of the Net Pension Liability on page 172 and 173, be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of the financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance onthe information because the limited procedures did not provide us with sufficient evidence to express an opinion or provide any assurance.

Supplementary Information

Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Commonwealth of Kentucky’s basic financial statements. The combining financial statements, presented in this report on pages 178through 231 are presented for purposes of additional analysis and are not a required part of the basic financial statements.

The combining financial statements are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the combining financial statements are fairly stated in all material respects in relation to the basic financial statements as a whole.

15


Other Information

The Introductory and Statistical sections presented in this report on pages 2 through 10 and 234 through 255 have not been subjected to the auditing procedures applied in the audit of the basic financial statements, and accordingly, we do not express an opinion or provide any assurance on them.

Other Reporting Required by Government Auditing Standards

In accordance with Government Auditing Standards, we will also issue our report on our consideration of the Commonwealth of Kentucky’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Commonwealth’s internal control over financial reporting and compliance.

Respectfully submitted,

Adam H. EdelenAuditor of Public Accounts

December 11, 2015

16

MANAGEMENT’S DISCUSSION AND ANALYSIS

17

MANAGEMENT’S DISCUSSION AND ANALYSIS

The Management’s Discussion and Analysis of the Commonwealth of Kentucky’s Comprehensive Annual Financial Report (CAFR) presents a discussion and analysis of the State’s fi nancial performance during the fi scal year ended June 30, 2015. It is supplementary information required by the Governmental Accounting Standards Board (GASB) and is intended to provide an easily readable explanation of the information in the basic fi nancial statements. It should be read in conjunction with the additional information that is furnished in the letter of transmittal, which can be found preceding this narrative, and with the Commonwealth’s fi nancial statements which follow.

FINANCIAL HIGHLIGHTS - PRIMARY GOVERNMENT

Government-Wide Highlights:The liabilities of the Commonwealth’s governmental activities exceeded its assets at fi scal year ending June 30, 2015, by $14.1 billion, a decrease in net position of $5.1 million related to current year activity. Assets of the Common-wealth’s business-type activities exceeded liabilities by $112.2 million, an increase in net position of $545.6 million related to current year activity. Total net position increased by $540.4 million to ($14) billion.

The assets of component units exceeded liabilities at fi scal year ending June 30, 2015, by $8.2 billion, an increase of $356.6 million related to current year activity.

This signifi cant decrease in the net position of the governmental activities when the Commonwealth adopted Gov-ernmental Accounting Standards Board (GASB) Statement No. 68 and No. 71 (GASB 68 and 71), Accounting and Financial Reporting for Pensions the provisions of which require the Commonwealth, as a participating employer in the Kentucky Employees Retirement System, the State Police Retirement System, the Teachers Retirement System, the Judicial Retirement Plan and the Legislators’ Retirement Plan (the Plans) , to refl ect in the Statement of Net Posi-tion its proportionate share of the net pension liability of the Plans. The adoption of this pronouncement resulted in a decrease of $24.6 billion in the Commonwealth’s beginning net position.

There was a fl uctuation in Governmental Activities concerning Federal Funds expenditures. There was a 14.2% ($1.3 billion) increase in federal expenditures as compared to FY 14. The Commonwealth had a slight increase in federal expenditures in all agencies except for the Cabinet for Health and Family Services (CHFS). CHFS had a $1.20 billion dollar increase in federal expenditures, an increase of 17.1% as compared to FY 14. This increase was caused primar-ily by the Medicaid Expansion under the Affordable Care Act. FY 15 was the fi rst full year of Medicaid Expansion which from its implementation date of January 1, 2014 has added over four hundred thousand (400,000) Medicaid Expansion recipients to the Commonwealth’s Medicaid Program. Capitation rates were paid for these new members for FY 15 and were funded one hundred per cent (100%) by federal funds.

Fund Highlights:As of the close of FY 15, the Commonwealth’s governmental funds reported combined ending fund balances of $2.0 billion, a net decrease of $184.1 million in comparison with the prior year. Approximately 84.5 percent or $1.7 billion of the ending fund balance is restricted. There is unrestricted (committed, assigned, or unassigned) fund balance of $214 million available for spending either at the government’s discretion or upon legislative approval.

Enterprise funds reported net position of $112.2 million, of which $516.2 million was restricted or invested in capital assets and the balance of ($404) million was unrestricted.

Long-Term Debt: The Commonwealth’s total long-term debt obligations (bonds and notes payable) decreased by $537.5 million to $7.6 billion during the current fi scal year. The decrease is attributable to the issuance of bonds mainly to refund older debt outstanding in addition to funding new projects. The reduction to liabilities includes advanced retirement of old debt and payment of principle of $1.1 billion while new issues for refunding and new projects were $596.6 million during FY 15. Additional details of these activities can be found in Note 15 beginning on Page 121.

18

OVERVIEW OF THE FINANCIAL STATEMENTS

The Commonwealth’s basic fi nancial statements include: (1) government-wide fi nancial statements, (2) fund fi nancial statements, and (3) notes to the fi nancial statements. This report also includes other required supplementary informa-tion (General and Special Revenue Fund budgetary schedules; condition and maintenance data regarding infrastruc-ture; and claims development information) and other supplementary information (combining fi nancial statements). Each of these components is described below.

Government-Wide Financial StatementsThe Government-Wide Financial Statements provide a broad view of the Commonwealth’s operations in a manner similar to a private-sector business. These statements report fi nancial information about the entire government except fi duciary activities. The statements provide both short-term and long-term information about the Commonwealth’s fi nancial position, which assists in assessing the Commonwealth’s economic condition at the end of the fi scal year. These are prepared using the fl ow of economic resources measurement focus and the accrual basis of accounting. They take into account all revenues and expenses of the fi scal year even if no cash has been received or paid. The government-wide fi nancial statements include two statements: The Statement of Net Position shows the fi nancial posi-tion of the Commonwealth at the end of the fi scal year. The Statement of Activities presents information showing how the government’s fi nancial position has changed since the beginning of the fi scal year.

Both of the above fi nancial statements have separate sections for three different types of state programs or activities.

These three types of activities are:

Governmental Activities – The activities in this section are mostly supported by taxes and intergovernmental rev-enues (federal grants). Most services normally associated with State government fall into this category. Internal Service Fund balances are reported as a part of governmental activities.

Business-Type Activities – These functions normally are intended to recover all or a signifi cant portion of their costs through user fees and charges to external users of goods and services provided by the State. The business-type activi-ties of the Commonwealth include the operations of various Enterprise Funds as listed later in the text.

Discretely Presented Component Units – These are operations for which the Commonwealth has fi nancial account-ability but which possess certain independent qualities as well. More information on the Commonwealth’s discretely presented component units can be found in Note 1 beginning on Page 53.

The government-wide fi nancial statements can be found immediately following this discussion and analysis.

Fund Financial Statements

A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specifi c activities or objectives. Some funds are required to be established by state law or bond covenants and addi-tional funds are established for management and fi scal control of resources.

The fund fi nancial statements focus on activities of state government. All of the funds of the Commonwealth can be divided into three categories: Governmental Funds, Proprietary Funds, and Fiduciary Funds. It is important to note that these fund categories use different accounting approaches and should be interpreted differently.

19

Table 1, below, summarizes the major features of the basic fi nancial statements and how the relate to one anouther.

Government-Wide Financial Statements

Governmental Proprietary FiduciaryScope Entire government (except

fiduciary funds) and the Commonwealth's component units

The activities of the Commonwealth that are not proprietary or fiduciary

Activities of the Commonwealth that are similar to private businesses

Instances where the Commonwealth is the trustee for someone else’s resources

Statement of Net Position Balance Sheet Statement of Fund Net Position

Statements of Fiduciary Net Position

Statement of Activities Statement of Revenues, Expenditures and Changes in Fund Balances

Statement of Revenues, Expenses, and Changes in Fund Net Position Statement of Cash Flows

Statement of Changes in Fiduciary Net Position

Accounting Basis and Measurement Focus

Accrual accounting and economic resources measurement focus

Modified accrual accounting and current financial resources focus



Type of Asset/Liability Information

All assets and liabilities, both financial and capital, and short-term and long-term

Only assets expected to be used up and liabilities that come due during the year or soon thereafter, no capital assets included

All assets and liabilities, both financial, and capital, and short-term and long-term

All assets and liabilities, both short-term and long-term

Type of Inflow – Outflow Information

All revenues and expenses during the year, regardless of when cash is received or paid

Revenues for which cash is received during or soon after the end of the year and expenditures when goods or services have been received and payment is due during the year or soon thereafter



Table 1. Major Features of the Commonwealth of Kentucky’s Government-Wide and Fund Financial StatementsFund Financial Statements

Required Financial Statements

Notes to the Financial Statements - Notes to the fi nancial statements provide information necessary to fully under-stand the data provided in the government-wide and fund fi nancial statements. They are an integral part of the fi nan-cial statements and focus on the primary government and its activities.

Required Supplementary Information - In addition to this Management’s Discussion and Analysis, which is re-quired supplementary information, the basic fi nancial statements are followed by a section of required supplementary information that further explains and supports the information contained in the fi nancial statements.

Other Supplementary Infrormation - Supplementary information includes the introductory section, combining fi -nancial statements for non-major governmental funds, non-major discretely presented component units, the individual internal service funds and fi duciary funds, and the statistical section.

20

GOVERNMENT-WIDE FINANCIAL ANALYSIS

Net PositionNet position may serve as a useful indicator of a government’s fi nancial position. The Commonwealth’s combined net position (governmental and business-type activities) totaled ($14) billion at the end of FY 15, as compared to $10.1 billion at the end of the previous year.

The largest portion of the Commonwealth’s net position, $21.6 billion, is net investment in capital assets (e.g. land, infrastructures, buildings and improvements and machinery and equipment), minus any related debt, which is still outstanding and used to acquire those assets. The Commonwealth uses these capital assets to provide services to its citizens; therefore, these assets are not available for future spending.

The second largest portion of the Commonwealth’s net position, totaling $1.2 billion, is restricted and represents resources that are subject to either external restrictions or legislative restrictions on how they may be used. The remaining balance is unrestricted net position. The unrestricted net position, if they have a positive value, could be used at the Commonwealth’s discretion. However, the unrestricted balance is ($36.8) billion; therefore funds are not available for discretionary purposes. A contributing factor to the negative balance is that liabilities are recognized on the government-wide statement of net position when the obligation is incurred. Accordingly, the Commonwealth rec-ognizes long-term liabilities (such as general bonded debt, compensated absences, unfunded employer pension cost, and contingent liabilities-shown in Note 15 to the fi nancial statements) on the statement of net position.

Table 2 below presents the Commonwealth’s condensed statement of net position as of June 30, 2015 and June 30, 2014, derived from the government-wide Statement of Net Position.

Table 2: Condensed Statement of Net Position (Expressed in Thousands)

2015 2014 2015 2014 2015 2014

Current Assets $ 5,424,568 $ 6,213,863 $ 1,487,121 $ 1,404,931 $ 6,911,689 $ 7,618,794 Capital Assets 23,537,288 23,058,318 315,834 328,198 23,853,122 23,386,516 Other Assets 333 290 333 290 Total Assets 28,962,189 29,272,471 1,802,955 1,733,129 30,765,144 31,005,600 Deferred outflows of resources 954,689 723,294 13,621 4,915 968,310 728,209

Non Current Liabilities 39,567,582 40,883,499 1,363,999 1,744,732 40,931,581 42,628,231 Other Liabilities 2,757,808 3,235,745 337,023 426,625 3,094,831 3,662,370 Total Liabilities 42,325,390 44,119,244 1,701,022 2,171,357 44,026,412 46,290,601 Deferred inflows of resources 1,732,999 12,952 3,311 1,736,310 12,952 Net investment in capital assets 21,288,572 20,908,588 303,571 315,131 21,592,143 21,223,719 Restricted 984,229 1,099,649 212,629 63,847 1,196,858 1,163,496 Unrestricted (36,414,312) (36,144,668) (403,957) (812,291) (36,818,269) (36,956,959) Total Net Position $ (14,141,511) $ (14,136,431) $ 112,243 $ (433,313) $ (14,029,268) $ (14,569,744)

Governmental Activities Business-Type Activities Total

21

Changes in Net PositionThe revenues and expenses information, as shown in Table 3, was derived from the government-wide Statement of Activities and refl ects how the Commonwealth’s net position changed during FY 15. The Commonwealth received program revenues of $14.1 billion and general revenues (including transfers) of $11.8 billion for total revenues of $25.9 billion during FY 15. Expenses for the Commonwealth during FY 15 were $25.4 billion, which resulted in a total increase of the Commonwealth’s net position in the amount of $540.4 million, net of contributions, transfers and special items.

Table 3: Condensed Statement of Activities (Expressed in Thousands)

Revenues:Program Revenues:

Charges for Services $ 1,366,738 $ 1,464,874 $ 2,639,949 $ 2,427,436 $ 4,006,687 $ 3,892,310Operating Grants and

Contributions 9,270,753 8,211,316 - 174,235 9,270,753 8,385,551Capital Grants and

Contributions 865,320 801,353 149 378 865,469 801,731General Revenues:

Income Taxes 4,604,837 4,209,469 4,604,837 4,209,469Sales Taxes 5,714,300 5,575,312 5,714,300 5,575,312

Property Taxes 570,998 553,339 570,998 553,339

Other Taxes 492,126 508,519 492,126 508,519Investment Earnings 4,264 (37) 14,971 13,546 19,235 13,509Other 430,747 520,136 5,693 648,466 436,440 1,168,602

Total Revenues 23,320,083 21,844,281 2,660,762 3,264,061 25,980,845 25,108,342

Expenses:Governmental Activities:

General Government 2,557,827 7,335,594 2,557,827 7,335,594Legislative and Judicial 433,354 2,959,423 433,354 2,959,423Commerce 110,041 585,366 110,041 585,366Education and Humanities 5,822,980 7,288,981 5,822,980 7,288,981Human Resources 11,098,078 14,917,179 11,098,078 14,917,179Justice 952,071 6,195,306 952,071 6,195,306Natural Resources and

Environmental Protection 190,532 1,227,825 190,532 1,227,825Public Protection and

Regulation 107,258 713,587 107,258 713,587Transportation 1,819,570 5,444,954 1,819,570 5,444,954Interest Expense 341,922 355,842 341,922 355,842

Business-type Activities:State Parks 110,220 211,982 110,220 211,982Kentucky Horse Park 19,278 35,973 19,278 35,973Kentucky Public Employees Health Plan 1,420,292 1,642,048 1,420,292 1,642,048Insurance Administration 116,723 172,372 116,723 172,372Unemployment Compensation 340,223 1,092,231 340,223 1,092,231

Total Expenses 23,433,633 47,024,057 2,006,736 3,154,606 25,440,369 50,178,663

Increase (Decrease) in Net Position Before Transfers (113,550) (25,179,776) 654,026 109,455 540,476 (25,070,321)Transfers 108,470 (4,214) (108,470) 4,214Change in Net Position (5,080) (25,183,990) 545,556 113,669 540,476 (25,070,321)

Net Position, July 1, as restated (14,136,431) 11,047,559 (433,313) (546,982) (14,569,744) 10,500,577Net Position, June 30 $ (14,141,511) $ (14,136,431) $ 112,243 $ (433,313) $ (14,029,268) $ (14,569,744)

2014

Total

2015Business-Type

Activities

2014Business-Type

Activities

2015Governmental

Activities

2014Governmental

Activities

2015

Total

22

Governmental Activities:

During the fi scal year, the change in net position resulted in a decrease from the previous year. The decrease in net position of governmental activities was ($5.1) million or 1 percent. Approximately 48.8 percent of the governmental activities’ total revenue came from taxes, while 49.3 percent resulted from grants and contributions (including federal aid). Table 4 below presents program expenses and revenues for governmental activities. Overall, program revenues were insuffi cient to cover program expenses for governmental activities. Therefore, the net program expenses of these governmental activities were supported by general revenues, mainly taxes.

Table 4 (Expressed in Thousands)

State ProgramsGeneral Government $ 2,557,827 $ 823,158 $ (1,734,669) Legislative and Judicial 433,354 29,527 (403,827) Commerce 110,041 72,557 (37,484) Education and Humanities 5,822,980 988,530 (4,834,450) Human Resources 11,098,078 8,275,533 (2,822,545) Justice 952,071 62,728 (889,343) Natural Resources and Environmental

Protection 190,532 94,318 (96,214) Public Protection and Regulation 107,258 92,266 (14,992) Transportation 1,819,570 1,064,194 (755,376) Totals $ 23,091,711 $ 11,502,811 $ (11,588,900)

Program Expenses Program RevenuesNet Program (Expenses)

Revenue

Business-Type Activities:

Table 5 below presents program expenses and revenues for business-type activities. The business-type activities increased the Commonwealth’s net position by $545.6 million. Program revenues generated by the operations of the State Parks and the Kentucky Horse Park were not suffi cient to cover program expenses. General revenues were needed to support expenses of these programs. Program revenues generated by the operations of the Kentucky Public Employees Health Plan, Insurance Administration and Unemployment Compensation were suffi cient to cover pro-gram expenses.

Table 5 (Expressed in Thousands)

State ProgramsState Parks $ 110,220 $ 48,080 $ (62,140) Kentucky Horse Park 19,278 12,407 (6,871) Kentucky Public Employees Health Plan 1,420,292 1,712,136 291,844 Insurance Administration 116,723 124,106 7,383 Unemployment Compensation 340,223 743,369 403,146 Totals $ 2,006,736 $ 2,640,098 $ 633,362

Program Expenses Program RevenuesNet Program (Expenses)

Revenue

Overall Analysis

Financial highlights for the State as a whole during fi scal year ended June 30, 2014, include the following:

• The liabilities of the State’s governmental activities now exceed assets (net position) at the close of the fi scal year. Liabilities exceeded assets by ($14.1) billion and the State’s business-type activities now have assets that exceed liabilities (net position) by $112.2 million.

• The State’s total net position decreased during the year by $540.4 million. Net position of governmental activities decreased by ($5.1) million, while net position of business-type activities increased by $54.6 million

• The primary cause of the increase in business-type activities net position is a decrease in loans payable to the Federal government of ($350.8) million for unemployment insurance.

23

FINANCIAL ANALYSIS OF THE COMMONWEALTH’S INDIVIDUAL FUNDS

At June 30, 2015, the Commonwealth’s governmental funds reported combined ending fund balances of $2.0 billion, a net decrease of $184.1 million in comparison with the prior year. $99.3 million is nonspendable and is compromised of inventories, notes receivables, cash with fi scal agents, and restricted cash that must remain intact. The $1.7 billion is restricted for certain purposes and is not available to fund current operations. The $214 million is considered un-restricted (committed, assigned, or unassigned). When the unrestricted balance is positive it is available for spending either at the government’s discretion or upon legislative approval.

General Fund

The General Fund is the primary operating fund of the Commonwealth. The fund balance at June 30, 2015, was $104.4 million. The balance reported refl ects an increase of $235.1 million from the previously reported amount, which represents an increase of 179.8%. The major factor for the increase in fund balance is an increase in revenues of $580.1 million or 6.2%. The fund balance is segregated into nonspendable and spendable amounts with the spendable amounts further seg-regated as restricted, committed, assigned, and unassigned. Inventory of $6.2 million represents the nonspendable amount. The unrestricted had a balance of $98.1 million, therefore is available for spending at the government’s dis-cretion or upon legislative approval.

The following governmental funds experienced signifi cant changes during the year:

Major Special Revenue Funds

The major special revenue funds experienced normal cyclical changes in revenues and expenditures, except for the Federal Fund, which experienced an increase in intergovernmental revenues of $1.3 billion. Expenditures decreased across a majority of all functions, except for CHFS which experienced an increase in expenditures of $1.2 billion a 13.6% increase in expenditures for total federal expenditures. This increase was caused primarily by the Medicaid Expansion under the Affordable Care Act. FY 2015 was the fi rst full year of Medicaid Expansion which from its implementation date of January 1, 2014 has added over four hundred thousand (400,000) Medicaid Expansion re-cipients to the Commonwealth’s Medicaid Program. Capitation rates were paid for these new members for FY 15 and were funded one hundred per cent (100%) by federal funds. The Transportation Fund experienced a slight decrease in revenues due to decrease tax receipts and an increase in expenditures, resulting in an decrease in fund balance of $204.3 million.

Proprietary Funds - The Commonwealth’s proprietary funds reported net position of $11.3 million, which included $112.2 million in the enterprise funds and ($100.9) million in the internal service funds. This is a total increase in net position of $152 million from the previous year. This increase was caused primarily by a change in the Common-wealth’s economy that resulted in a decrease in unemployment insurance receipts in the Unemployment Compensa-tion Fund of $637.9 million and a decrease in benefi t payments of $752.2 million.

GENERAL FUND BUDGETARY HIGHLIGHTS

During the year, as the national and state economy began to improve, the offi cial revenue forecast for the General Fund was increased. The General Fund revenues, for the year, were more than the fi nal budgetary estimates by ap-proximately $165.4 million. Actual expenditures for the year were approximately $157.4 million less than the fi nal budgeted amount.

CAPITAL ASSET AND DEBT ADMINISTRATION Capital Assets - The Commonwealth’s investment in capital assets for its governmental and business-type activities as of June 30, 2015, amounts to $25.2 billion, with accumulated depreciation of $1.3 billion, leaving a net book value of $23.4 billion. This investment in capital assets includes land, improvements, buildings, equipment, and construc-tion in progress, infrastructure and intangibles. Infrastructure assets are normally immovable and of value only to the

24

Commonwealth, such as roads, bridges, streets and sidewalks, drainage systems, lighting systems, and similar items.The total increase in the Commonwealth’s investment in capital assets for the current fi scal year was about 1.7 percent in terms of net book value. However, actual expenditures to purchase or construct capital assets were $647.8 million for the year. Most of this amount was used to construct or reconstruct roads and bridges. Depreciation charges for the year totaled $111.5 million. Additional information on the Commonwealth’s capital assets can be found in Note 6 of the “Notes to the Financial Statements” of this report.

Infrastructure Assets – The Commonwealth has elected to utilize the “Modifi ed Approach” as it relates to guidelines set forth in the GASB (Government Accounting Standards Board) Statement Number 34. Under this alternative meth-od the Commonwealth expenses certain maintenance and preservation costs and does not report depreciation expense. Assets accounted for under the modifi ed approach include nearly 64,187 lane miles of roads and approximately 9,011 bridges that the Commonwealth has responsibility for maintaining.

• There have been no signifi cant changes in the condition level of infrastructure assets.• The asset condition level established by the Commonwealth has approximately been met and exceeded for the

past eight years.• Actual expenditures necessary to maintain and preserve infrastructure assets at target condition levels were ap-

proximately 33.3 million more than the reported estimate of $1,160.2 million for fi scal year 2015.

A more in-depth discussion of the Commonwealth’s infrastructure assets is located in the “Required Supplemental Information” section of this report.

Debt Administration - The Offi ce of Financial Management as established in KRS 42.4201, is responsible for the oversight of the Commonwealth’s debt. The Offi ce develops a long-term debt plan including criteria for the issuance of debt and an evaluation of the total state debt to be incurred. Debt is issued through the State Property and Buildings Commission and the Kentucky Asset/Liability Commission.

The Commonwealth of Kentucky’s bonded debt decreased by $136.7 million to $6.2 billion, a 2.2% decrease during the current fi scal year. The major factor in this decrease is a result of the refunding of old issues by the FY 15 new issues. Therefore, the remaining liability on the retired bonds plus the FY 15 principle payments on the remaining outstanding bonds were greater than the FY 15 issues for new projects. No general obligation bonds were authorized or outstanding at June 30, 2015. Additional information on the Commonwealth’s long-term debt obligations can be found in Note 15 of the notes to the fi nancial statements of this report.

ECONOMIC FACTORS AND NEXT YEAR’S BUDGET AND RATES

The unemployment rate for the Commonwealth of Kentucky is currently 4.9 percent. The October rate is down 0.7 percentage points compared to the October 2014 rate of 5.6 percent. The national unemployment rate has also fallen 0.8 percentage points from 5.8 percent in October 2014 to 5.0 percent in October 2015. Kentucky saw net job growth in eight of ten major sectors over the previous year, a trend that is forecast to continue through the 2017 fi scal year. Personal incomes in both Kentucky and the nation are improving. Personal income was up 4.8 percent in the fi rst quarter of fi scal year 2016 compared to the same quarter in 2015. This was higher than the 4.3 percent growth the US as a whole saw over the same period. Kentuckians’ wages and salaries were up 4.9 percent year-over-year and forecast to grow 4.5 percent over the entire fi scal year. U.S. real gross domestic product is projected to grow at a rate of 2.4 percent in fi scal year 2016, and three percent in 2017. The housing sector shows modest signs of improvement, and household debt is slowly growing again. The price of crude oil has dropped to its lowest point since 2007, keeping downward pressure on wages and other prices. Slow economic growth in Europe and Asia, the prospect of another unusually harsh winter, and remaining monetary policy uncertainty in Washington could put some downward pressure on U.S. economic growth prospects

REQUESTS FOR INFORMATIONThis fi nancial report is designed to provide a general overview of the Commonwealth of Kentucky’s fi nances for all of Kentucky’s citizens, taxpayers, customers, investors, and creditors. This fi nancial report seeks to demonstrate the Commonwealth’s accountability for the money it receives. Questions concerning any of the information provided in this report or requests for additional information should be addressed to: Commonwealth of Kentucky, Finance and

25

BASIC FINANCIAL STATEMENTS

26

GOVERNMENT-WIDE FINANCIAL STATEMENTS

27

COMMONWEALTH OF KENTUCKYSTATEMENT OF NET POSITIONJUNE 30, 2015(Expressed in Thousands)

AssetsCash and cash equivalents (Note 5) $ 710,702 $ 310,615 $ 1,021,317 $ 1,632,816Cash with fiscal agents (Note 5) 78,028 78,028

4,238 4,23883,823

Investments, net of amortization (Note 5) 1,494,290 1,494,290 2,182,824Invested security collateral (Note 5) 557,507 271,457 828,964Receivables, net (Note 4) 2,391,352 304,747 2,696,099 3,755,223Notes receivable 5,568 113 5,681Capital lease receivable (Note 4) 149,310 149,310Internal balances (Note 7) (57,788) 57,788Inventories 76,096 1,767 77,863 62,270Prepaid expenses 9,788 277 10,065 26,962Unamortized cost of issuance 5,477 5,477Restricted assets:

Temporarily restricted:Cash and cash equivalents (Note 5) 703,478Investments (Note 5) 540,357 540,357 1,907,868

Capital assets (Note 6):Land 219,501 21,823 241,324 298,641Improvements other than buildings 25,945 144,933 170,878 508,902Buildings 1,399,687 339,962 1,739,649 7,225,850Machinery and equipment 643,321 21,799 665,120 2,085,229Other capital assets 149,551Easements and other intangibles 179,613 2,322 181,935

Less: Accumulated depreciationand amortization (1,073,440) (240,881) (1,314,321) (4,649,867)

Construction in progress 1,911,871 25,876 1,937,747 1,307,924Infrastructure 20,230,790 20,230,790 23,421

Total Capital Assets 23,537,288 315,834 23,853,122 6,949,651 Other assets 333 333 230,788

Total Assets 28,962,189 1,802,955 30,765,144 17,535,703Deferred outflows of resources (Note 15) 954,689 13,621 968,310 131,354

LiabilitiesAccounts payable (Note 4) 1,842,377 62,704 1,905,081 588,543Tax refunds payable 353,612 353,612Unearned revenue 4,312 1,632 5,944 213,007Other liabilities 1,230 1,230 141,361Liabilities from restricted assets 6,366Obligations under securities lending 557,507 271,457 828,964Noncurrent liabilities:

Due within one year (Note 15) 895,381 198,196 1,093,577 329,895Due in more than one year (Note 15) 38,672,201 1,165,803 39,838,004 7,865,540

Total Liabilities 42,325,390 1,701,022 44,026,412 9,144,712Deferred inflows of resources (Note 15) 1,732,999 3,311 1,736,310 370,510

Net PositionNet investment in capital assets 21,288,572 303,571 21,592,143 4,414,076Restricted for:

Debt service 138,192 138,192 302,006Capital projects 302,504 302,504 242,457Highways 543,533 543,533Unemployment benefits 150,855 150,855Other purposes (Note 1) 61,774 61,774 3,466,917

Unrestricted (36,414,312) (403,957) (36,818,269) (273,621)Total Net Position $ (14,141,511) $ 112,243 $ (14,029,268) $ 8,151,835

THE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS ARE AN INTEGRAL PART OF THIS STATEMENT.

Total

Primary GovernmentComponent

UnitsGovernmental

ActivitiesBusiness-Type

Activities

28

COMMONWEALTH OF KENTUCKYSTATEMENT OF ACTIVITIESFOR THE YEAR ENDED JUNE 30, 2015(Expressed in Thousands)

Functions/ProgramsPrimary Government:Governmental Activities:

General government $ 2,557,827 $ 626,337 $ 168,823 $ 27,998Legislative and judicial 433,354 25,866 3,661Commerce 110,041 58,617 13,940Education and humanities 5,822,980 64,776 922,023 1,731Human resources 11,098,078 164,793 8,039,897 70,843Justice 952,071 22,755 39,973Natural resources and

environmental protection 190,532 17,014 77,304Public protection and regulation 107,258 87,134 5,132Transportation 1,819,570 299,446 764,748Interest expense 341,922

Total Governmental Activities 23,433,633 1,366,738 9,270,753 865,320

Business-Type Activities:State Parks 110,220 47,931 149Kentucky Horse Park 19,278 12,407Kentucky Public Employees Health Plan 1,420,292 1,712,136Insurance Administration 116,723 124,106Unemployment Compensation 340,223 743,369

Total Business-Type Activities 2,006,736 2,639,949 149Total Primary Government $ 25,440,369 $ 4,006,687 $ 9,270,753 $ 865,469

Component Units:Authorities:

Kentucky Housing Corporation $ 294,262 $ 93,745 $ 208,579 $Kentucky Higher Education Student

Loan Corporation 33,507 33,532Kentucky Lottery Corporation 893,567 886,930Kentucky Public Transportation

Infrastructure Authority 39,241 91,947Universities, Colleges, & Related Entities:

University of Kentucky 2,609,253 2,084,282 407,085 45,872University of Louisville 1,107,874 681,277 165,833Kentucky Community and

Technical College System 639,110 104,978 89,343Other component units 1,773,060 764,728 368,682 12,107Total Component Units $ 7,389,874 $ 4,649,472 $ 1,239,522 $ 149,926

General Revenues (Note 1): Taxes:

Sales and gross receipt taxIndividual income taxCorporate income taxProperty taxLicense and privilege taxSeverance taxInheritance and estate taxMiscellaneous taxesUnrestricted grants and contributionsUnrestricted investment earningsGain on sale of capital assetsMiscellaneous general

Transfers Total General Revenues and Transfers

Change in Net PositionNet Position at July 1, As Restated (Note 2)Net Position at June 30


Grants and Contributions

CapitalProgram Revenues

ExpensesCharges for

Services

OperatingGrants and

Contributions

29

$ (1,734,669) $ $ (1,734,669)(403,827) (403,827)

(37,484) (37,484)(4,834,450) (4,834,450)(2,822,545) (2,822,545)

(889,343) (889,343)

(96,214) (96,214)(14,992) (14,992)

(755,376) (755,376)(341,922) (341,922)

(11,930,822) (11,930,822)

(62,140) (62,140)(6,871) (6,871)

291,844 291,8447,383 7,383

403,146 403,146633,362 633,362

(11,930,822) 633,362 (11,297,460)

$ 8,062

25(6,637)

52,706

(72,014)(260,764)

(444,789)(627,543)

(1,350,954)

5,714,300 5,714,3004,064,705 4,064,705

540,132 540,132570,998 570,998

13,742 13,742235,068 235,068

52,616 52,616190,700 190,700

10,348 10,348 669,9684,264 14,971 19,235 1,5447,259 7,259 51

413,140 5,693 418,833 1,036,037108,470 (108,470)

11,925,742 (87,806) 11,837,936 1,707,600(5,080) 545,556 540,476 356,646

(14,136,431) (433,313) (14,569,744) 7,795,189$ (14,141,511) $ 112,243 $ (14,029,268) $ 8,151,835

Totals

Primary GovernmentNet (Expense) Revenue and Changes in Net Position

ComponentUnitsActivities

GovernmentalActivities

Business-Type

30

GOVERNMENTAL FUNDS FINANCIAL STATEMENTS

Major Funds

General Fund

The General Fund is the Commonwealth’s operating fund and accounts for and reports all fi nancial resources appropriated by the General Assembly that are not required to be accounted for in other funds.

Transportation Fund

The Transportation Fund accounts for and reports specifi c revenue sources which are restricted or committed for the construction, preservation, and maintenance of roads.

Federal Fund

The Federal Fund accounts for and reports monies received from the federal government that are restricted or committed to specifi c programs and operations.

Agency Revenue Fund

The Agency Revenue Fund accounts for and reports specifi c taxes, fees, and charges that are restricted or committed to expenditures for a particular function or activity. The General Assembly usually appropriates this fund.

Capital Projects Fund

The Capital Projects Fund accounts for and reports fi nancial resources that are restricted, committed, or assigned for capital outlay as appropriated by the General Assembly for the acquisition, construc-tion, or renovation of major capital facilities, and for the acquisition of major equipment other than that fi nanced by proprietary funds, certain trust funds, and university and college funds.

Debt Service Fund

The Debt Service Fund accounts for and reports fi nancial resources that are restricted, committed, or assigned to expenditures for repayment of principal, interest, and administrative fees due on general long-term issues of the Commonwealth and for the accumulation of fi nancial resources used to make such payments.

Non-Major Funds

Non-Major governmental funds are presented by fund type beginning on page …………………178

31

COMMONWEALTH OF KENTUCKYBALANCE SHEETGOVERNMENTAL FUNDSJUNE 30, 2015(Expressed in Thousands)

AssetsCash and cash equivalents (Note 5) $ 299,060 $ 17,609 $ 6 $ 59,863 $ 12,313 $ 48 $ 265,864 $ 654,763Cash with fiscal agents (Note 5) 6,958 18,954 25,912Restricted cash (Note 5) 2,847 1,391 4,238Investments, net of

amortization (Note 5) 4,136 436,464 463,768 299,866 1,069 271,301 1,476,604Invested security collateral 110,869 131,101 149,414 90,234 75,889 557,507Receivables, net (Note 4) 925,176 150,103 1,050,397 60,633 13,176 190,749 2,390,234Notes receivable 269 2,964 2,097 5,330Capital lease receivable (Note 4) 149,310 149,310Interfund receivables (Note 7) 22,793 834 27,721 89,705 1,317 15 124,914 267,299Interfund loans receivable (Note 7) 92,854 459 13,566 106,879Inventories 6,230 64,190 277 2,880 37 73,614

Total Assets $ 1,461,118 $ 800,760 $ 1,081,517 $ 830,618 $ 423,864 $ 169,396 $ 944,417 $ 5,711,690

Liabilities and Fund BalancesLiabilities:

Accounts payable (Note 4) $ 566,285 $ 118,582 $ 975,057 $ 67,359 $ 29,835 $ $ 14,993 $ 1,772,111Tax refunds payable 353,612 353,612Interfund payables (Note 7) 125,495 1,620 39,064 20,000 455 145,793 332,427Interfund loans payable (Note 7) 4,873 35,174 6,608 52,744 99,399Obligations under securities

lending 110,869 131,101 149,414 90,234 75,889 557,507Unearned revenue 343 2,241 1,705 4,289

Total Liabilities 1,161,134 251,303 1,049,638 245,622 120,524 291,124 3,119,345

Deferred inflows of resourcesUnavailable 195,625 5,924 91,283 28,219 836 149,310 101,079 572,276

Fund Balances:Nonspendable (Note 1) 6,230 64,190 546 7,235 18,954 2,134 99,289Restricted for (Note 1) 479,343 504,659 302,504 1,132 419,126 1,706,764Committed to (Note1) 32,893 127,911 160,804Assigned to (Note1) 27,069 11,990 3,043 42,102Unassigned (Note 1) 71,060 (59,950) 11,110

Total Fund Balances 104,359 543,533 (59,404) 556,777 302,504 20,086 552,214 2,020,069Total Liabilities and Fund

Balances $ 1,461,118 $ 800,760 $ 1,081,517 $ 830,618 $ 423,864 $ 169,396 $ 944,417 $ 5,711,690


CapitalProjects

GovernmentalFundsGeneral Transportation

AgencyRevenueFederal Funds

Non-MajorDebt

Service

TotalGovernmental

32

RECONCILIATION OF THE BALANCE SHEET- GOVERNMENTAL FUNDSTO THE STATEMENT OF NET POSITIONJUNE 30, 2015(Expressed in Thousands)

Total Fund Balances - Governmental Funds $ 2,020,069

Amounts reported for governmental activities in the statement of net position are different because:

Capital assets used in governmental activities are not financial resources and, therefore, are not reported in the funds.

Land and other non-depreciable assets 336,734 Buildings, equipment, and other depreciable assets 1,700,578 Infrastructure 20,230,790 Accumulated depreciation (793,274) Construction in progress 1,814,985 23,289,813

Certain revenues are earned but not available, and therefore, are deferred inthe funds. 572,276

Other long-term assets are not available to pay for current-period expenditures and, therefore, are deferred in the funds. 15,592

Internal service funds are used by management to charge the costs of Fleet Management,Computer Services, Central Printing, Prison Industries, Property Management and Risk Management to individual funds. The assets and liabilities of the internal servicefunds are included in governmental activities in the Statement of Net Position. (100,948)

Long-term liabilities are not due and payable in the current period and, therefore, are notreported in the funds.

Capital lease obligations (38,906)Compensated absences (228,263)Pollution remediation obligations (8,241)Judgements and contingencies (17,469)Lexington-Fayette Urban County Government Public Facilities Corporation (LFUCGPFC) - Memorandum of Understanding (MOU) obligations (130,080)Net pension obligations and related deferred outflows/inflows (31,321,087) (31,744,046)

Long-term bonded debt is not due and payable in the current period and, therefore, is notreported in the funds. Unamortized premiums, loss on refundings, and interest payable are not reported in the funds; however, these amounts are included in the Statement of Net Position. This is the net effect of these balances on the statement:

Bonds payable (6,223,517) Notes payable (1,467,573) Unamortized premiums and discounts (358,915) Less deferred amounts on refundings (32,332) Accrued interest payable (111,930) (8,194,267)

Net Position of Governmental Activities $ (14,141,511)

33

COMMONWEALTH OF KENTUCKYSTATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCESGOVERNMENTAL FUNDSFOR THE YEAR ENDED JUNE 30, 2015(Expressed in Thousands)

RevenuesTaxes $ 9,626,220 $ 1,361,857 $ $ 413,661 $ $ $ 91,181 $ 11,492,919Licenses, fees, and permits 47,898 145,649 26 188,620 4,564 386,757Intergovernmental 10,321 7 9,978,699 46,479 100,087 118 10,135,711Charges for services 248,409 8,649 1,373 635,838 3 35,617 243,285 1,173,174Fines and forfeits 36,463 25 7,432 20,835 64,755Interest and other

investment income 4,326 5,506 140 6,794 8,577 645 4,602 30,590Increase (decrease) in fair

value of investments (581) (3,317) (2,897) (4,850) (2) (1,897) (13,544)Securities lending income 530 627 714 431 362 2,664Other revenues 36,958 6,739 94,453 277,791 77 491 103,492 520,001

Total Revenues 10,010,544 1,525,742 10,074,691 1,574,432 104,325 36,751 466,542 23,793,027

ExpendituresCurrent:

General government 1,531,764 130,807 166,868 278,044 2,107,483Legislative and judicial 390,942 3,671 42,496 437,109Commerce 30,797 17,937 49,621 471 98,826Education and humanities 4,246,743 970,638 55,884 73,922 5,347,187Human resources 2,258,739 8,187,458 964,304 27,372 11,437,873Justice 703,576 39,633 94,567 1,679 839,455Natural resources and

environmental protection 66,248 67,511 44,927 7,955 186,641Public protection and regulation 15,531 6,040 79,289 2,588 103,448Transportation 13,995 1,565,161 691,597 185,457 205,014 2,661,224

Debt service:Principal retirement 2,033 8,841 416,435 143,972 571,281Interest and fiscal charges 253,756 98,802 352,558Other expenditures 4,032 16,399 20,431

Securities lending 237 280 319 192 162 1,190Capital outlay:

Buildings 231,483 231,483Total Expenditures 9,260,605 1,565,441 10,115,292 1,692,573 231,675 674,223 856,380 24,396,189

Excess (Deficiency) of Revenues over (under) Expenditures 749,939 (39,699) (40,601) (118,141) (127,350) (637,472) (389,838) (603,162)

Other Financing Sources (Uses)Transfers in 200,833 1,386 51 436,672 39,541 634,046 745,724 2,058,253Transfers out (725,567) (167,718) (82,908) (394,640) (68,848) (491) (568,946) (2,009,118)Capitalized leases 10,219 1,707 2,440 2,082 622 17,070Issuance of bonds:

New issues 129,620 93,302 222,922Refunding issues 254,380 119,332 373,712Premiums 20,380 52,046 4,351 76,777Discounts (972) (972)

Certificates of participation 62,955 5,620 68,575Premiums 1,621 1,621

Payments to refunded bondescrow agent (304,418) (104,987) (409,405)

Total Other FinancingSources (Uses) (514,515) (164,625) (80,417) 44,114 184,270 642,804 287,804 399,435

Net Change in Fund Balances 235,424 (204,324) (121,018) (74,027) 56,920 5,332 (102,034) (203,727)

Fund Balances at July 1 (130,790) 728,333 61,526 630,535 245,584 14,754 654,248 2,204,190Increase (decrease) in inventories (275) 19,524 88 269 19,606Fund Balances at June 30 $ 104,359 $ 543,533 $ (59,404) $ 556,777 $ 302,504 $ 20,086 $ 552,214 $ 2,020,069

Non-Major

Funds

Total

FundsGovernmentalCapital

ProjectsGovernmental

General Transportation FederalAgency

RevenueDebt

Service

34

RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES-GOVERNMENTAL FUNDSTO THE STATEMENT OF ACTIVITIESFOR THE YEAR ENDED JUNE 30, 2015(Expressed in Thousands)

Net Change in Fund Balances-Total Governmental Funds $ (203,727)

Amounts reported for governmental activities in the statement of activities are different because:

Governmental funds report capital outlays as expenditures. However, in the statement of activities the cost of those assets is allocated over their estimated useful lives andreported as depreciation expense. This is the amount by which capital outlaysexceeded depreciation in the current period:

Assets disposed of, net book value (127,415)Donated assets, fair market value 600Buildings, equipment, and other depreciable assets 64,351Infrastructure 585,936Accumulated depreciation (68,747) 454,725

Revenues in the statement of activities that do not provide current financial resourcesare not reported as revenues in the funds. 96,107

Certain expenditures are reported in the funds; however, they increase assets reportedon the Statement of Net Position and have been eliminated from the Statement of Activities:

Prepaid Expenses 9,783Inventories 19,606 29,389

Internal service funds are used by management to charge the costs of Fleet Management,Computer Services, Central Printing, Prison Industries, Property Management and Risk Management to individual funds. The net revenues (expense) of certain activities of the internal service funds are reported with governmental activities. 27,944

Certain expenditures are reported in the funds; however, they either increase or decreaselong-term liabilities reported on the Statement of Net Position and have been eliminatedfrom the Statement of Activities.

Capital lease payments 6,037Compensated absence payments (10,655)Pollution remediation payments 10,178Litigation payments 18,894Lexington-Fayette Urban County Government Public Facilities Corporation (LFUCGPFC) - Memorandum of Understanding (MOU) obligations 4,380Excess contributions to pension funds (572,376) (543,542)

The issuance of long-term debt (e.g. bonds, leases) provides current financial resourcesto governmental funds, while the repayment of the principal of long-term debt consumesthe current financial resources of governmental funds. Neither transaction, however, hasany effect on net position. Also, governmental funds report the effect of issuance costs,premiums, discounts and similar items when debt is first issued, whereas these amountsare deferred and amortized in the statement of activities. This amount is the net effect ofthese differences in the treatment of long-term debt and related items.

Bond and note proceeds and premiums received (742,635)Repayment of bond principal 571,281Payment to refunded bond escrow agent 409,405Accrued interest (75,140)Loss on refunding (2,044)Unamortized issue costs (26,843) 134,024

Change in Net Position of Governmental Activities $ (5,080)

35

PROPRIETARY FUNDS FINANCIAL STATEMENTS

Enterprise Funds (All Major)

State Parks FundThe State Parks Fund accounts for revenues earned and expenses incurred in the commercial opera-tions of the Department of Parks.

Kentucky Horse Park FundThe Kentucky Horse Park Fund accounts for revenues earned and expenses incurred in the com-mercial operations of the Kentucky Horse Park.

Insurance Administration FundThe Insurance Administration Fund accounts for insurance risk pools operated by the state. These include:

Workers’ Compensation Fund provides benefi ts for workers with illnesses, which are not attributable to one employer. Coal Workers’ Pneumoconiosis provides benefi ts for workers with pneumoconiosis resulting from exposure to coal dust created in the severance or processing of coal. Petroleum Storage Tank Environmental Assurance Program provides for the cleanup of leaking underground storage tanks in amounts that exceed the insurance required of the owners and operators. Mine Subsidence Insurance Program provides coverage against losses arising out of or due to mine subsidence within the Commonwealth. Kentucky Reclamation Guaranty Fund provides coverage to reclaim surface mined land when the permit holder has forfeited bonds posted for such purpose.

Kentucky Public Employees Health Insurance FundThe Kentucky Public Employees Health Insurance Fund accounts for the revenues and expenses incurred in the commercial operation of the health insurance program for state employees, local boards of education, and quasi-governmental agencies.

Unemployment Compensation FundThe Unemployment Compensation Fund accounts for assessed employer contributions and related unemployment compensation payments.

Internal Service Funds

Individual fund statements for the Internal Service Funds, whose combined totals are presented on this statement, begin on page ……………………...……………………...…………………..…188

36

COMMONWEALTH OF KENTUCKYSTATEMENT OF FUND NET POSITIONPROPRIETARY FUNDS JUNE 30, 2015(Expressed in Thousands)

Business-Type Activities-

AssetsCurrent assets:

Cash and cash equivalents (Note 5) $ 136 $ 1,176 $ 59,990Cash with fiscal agents (Note 5)Invested security collateral (Note5) 271,457Receivables, net (Note 4) 1,363 464 19,911Interfunds receivable (Note 7) 41 232Inventories 1,375 392Prepaid expenses 47

Total Current Assets 2,962 2,032 351,590

Noncurrent assets:Investments, net of amortization (Note 5) 2,491 424 377,490Receivables, net 113Capital assets (Note 6):

Land 17,370 4,453Improvements other than buildings 114,135 30,798Buildings 239,779 100,183Machinery and equipment 14,629 5,412 1,758Easements and other intangibles 2,322

Less: Accumulated depreciation and amortization (202,610) (37,292) (979)Construction in progress 21,836 3,399 641

Total Capital Assets 207,461 106,953 1,420Total Noncurrent Assets 209,952 107,490 378,910

Total Assets 212,914 109,522 730,500Deferred outflows of resources (Note 15) 7,651 1,005 4,201

LiabilitiesCurrent liabilities:

Accounts payable (Note 4) 7,717 1,470 1,662Interfunds payable (Note 7) 669 105 1,378Interfund loans payable (Note 7) 4,936Claims liability (Note 15) 77,859Claims adjustment liability (Note 15) 5,375Capital lease obligations (Note 10) (Note 15) 726 347Compensated absences (Note 15) 3,291 433 990Unearned revenue 1,576 56Loans payable to the federal government (Note 15)Obligations under securities lending 271,457

Total Current Liabilities 18,915 2,411 358,721

Noncurrent liabilities:Claims liability (Note 15) 861,180Claims adjustment liability (Note 15) 58,340Capital lease obligations (Note 10) (Note 15) 9,082 2,107Compensated absences (Note 15) 1,947 141 553Net pension liability (Note 8) (Note 15) 129,773 16,822 73,698Other liabilities (Note 15)

Total Noncurrent Liabilities 140,802 19,070 993,771Total Liabilities 159,717 21,481 1,352,492

Deferred inflows of resources (Note 15) 1,928 280 947

Net PositionNet investment in capital assets 197,653 104,499 1,419Restricted for:

Unemployment benefitsOther purposes (Note 1) 61,774

Unrestricted (138,733) (15,733) (681,931)Total Net Position $ 58,920 $ 88,766 $ (618,738)


Parks

Kentucky

AdministrationParkInsuranceState Horse

37

Enterprise Funds

$ 240,444 $ 8,869 $ 310,615 $ 55,93952,116

271,45766,809 216,200 304,747 1,11768,500 94 68,867 4,475

1,767 2,481230 277 5

375,983 225,163 957,730 116,133

159,952 540,357 17,686113 238

21,823 17,804144,933 3,133339,962 275,588

21,799 132,5542,322 1,675

(240,881) (280,166)25,876 96,886

315,834 247,474159,952 856,304 265,398535,935 225,163 1,814,034 381,531

764 13,621 12,603

19,693 32,162 62,704 14,7183,991 6,143 2,071

4,936 2,54470,697 148,556 26,326

5,375 8001,073 10,394

323 5,037 3,3141,632 26

38,155 38,155271,457

90,713 74,308 545,068 60,193

861,180 183,74758,340 4,58811,189 22,192

49 2,690 4,66912,111 232,404 216,906

1,230 1,23013,390 1,167,033 432,102

104,103 74,308 1,712,101 492,295156 3,311 2,787

303,571 214,887

150,855 150,85561,774

432,440 (403,957) (315,835)$ 432,440 $ 150,855 $ 112,243 $ (100,948)

Health PlanTotalsUnemployment

Compensation

Kentucky

EmployeesPublic

GovernmentalActivities-InternalServiceFundsJune 30, 2015

38

COMMONWEALTH OF KENTUCKYSTATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET POSITIONPROPRIETARY FUNDSFOR THE YEAR ENDED JUNE 30, 2015(Expressed in Thousands)

Business-Type Activities-

Operating Revenues:Charges for sales and services:

State parks sales and services $ 47,931 $ $Horse park admissions and sales 12,407Insurance receipts 124,106Unemployment insurance receiptsInternal service fund receiptsOther services 1,857 532 3,453

Total Operating Revenues 49,788 12,939 127,559

Operating Expenses:Personal services 57,771 8,464 25,159Utilities, rental, and other services 18,884 3,570 2,580Commodities and supplies 20,152 3,061 2,090Grants and subsidiesDepreciation and amortization 11,835 4,081 204Travel 220 8 418Reinsurance expenseClaims expense 64,612Claims adjustment expense 10,870Other expenses 668 188

Total Operating Expenses 109,530 19,184 106,121Operating Income (Loss) (59,742) (6,245) 21,438

Nonoperating Revenues (Expenses):Gain (loss) on sale of capital assets (51) (9)Interest and other investment income 1 14,871Securities lending income 387Increase (decrease) in fair value of investments (588)Interest expense (639) (94)Other revenues (expenses) (10,593)

Total Nonoperating Revenues (Expenses) (689) (94) 4,068

Income (Loss) before Capital Contributionsand Transfers (60,431) (6,339) 25,506

Capital contributionsTransfers in 34,591 3,047 121Transfers out (406) (18,762)

Change in Net Position (26,246) (3,292) 6,865

Net Position at July 1, As Restated (Note 2) 85,166 92,058 (625,603)Net Position at June 30 $ 58,920 $ 88,766 $ (618,738)

KentuckyHorsePark

StateParks

InsuranceAdministration

39

Enterprise Funds

$ $ $ 47,931 $12,407

1,712,136 1,836,242743,369 743,369

222,7895,842 13,927

1,712,136 743,369 2,645,791 236,716

7,614 7 99,015 106,5821,496 38 26,568 41,139

12,666 37,969 42,544340,178 340,178 569

16,120 26,66211 657 175

12,9871,394,712 1,459,324 37,947

77,493 88,363 404(73,700) (72,844)

1,420,292 340,223 1,995,350 269,009291,844 403,146 650,441 (32,293)

(60) (122)300 15,172 (1)

387(588)(733) (798)

(10,593) 70300 3,585 (851)

292,144 403,146 654,026 (33,144)

7194 37,853 63,876

(93,000) (34,155) (146,323) (2,859)199,144 369,085 545,556 27,944

233,296 (218,230) (433,313) (128,892)$ 432,440 $ 150,855 $ 112,243 $ (100,948)

Health Plan FundsJune 30, 2015UnemploymentCompensation

Totals

GovernmentalActivities-

InternalService

KentuckyPublic

Employees

40

COMMONWEALTH OF KENTUCKYSTATEMENT OF CASH FLOWSPROPRIETARY FUNDSFOR THE YEAR ENDED JUNE 30, 2015(Expressed in Thousands) .

Business-Type Activities -

Cash Flows from Operating ActivitiesCash received from customers - public $ 47,296 $ 12,352 $ 123,585Cash received from customers - state 768 86 1,367Cash payments to suppliers for goods and services (30,468) (6,324) (6,217)Cash payments for employee salaries and benefits (55,725) (8,209) (23,498)Cash payments for claims expense (85,917)Cash payments from other sources 1,857 532 3,354Cash payments to other sources (668) (12,466)

Net Cash Provided (Used) by Operating Activities (36,940) (1,563) 208

Cash Flows from Noncapital Financing ActivitiesTransfers from other funds 34,591 3,047 121Transfers to other funds (406) (18,762)

Net Cash Provided (Used) by Noncapital Financing Activities 34,185 3,047 (18,641)

Cash Flows from Capital and Related Financing ActivitiesAcquisition and construction of capital assets (2,772) (478) (1,148)Principal paid on revenue bond maturities and equipment contracts (695) (367)Interest paid on revenue bonds and equipment contracts (270) (94)Proceeds from the sale of capital assets

Net Cash Provided (Used) for Capital and Related Financing Activities (3,737) (939) (1,148)

Cash Flows from Investing ActivitiesPurchase of investment securities (103,177)Proceeds from the sale of investment securities 5,513 236 55,377Interest and dividends on investments 1 15,036

Net Cash Provided (Used) in Investing Activities 5,514 236 (32,764)

Net Increase (Decrease) in Cash and Cash Equivalents (978) 781 (52,345)Cash and Cash Equivalents at July 1 1,114 395 112,335Cash and Cash Equivalents at June 30 $ 136 $ 1,176 $ 59,990

Reconciliation of Operating Income to Net Cash Provided by Operating Activities:

Operating income (loss) $ (59,742) $ (6,245) $ 21,438Adjustments to reconcile operating income to

net cash provided (used) by operating activities:Depreciation and amortization 11,835 4,081 204Interest and other investment income (10,263)Miscellaneous nonoperating income (expense)Change in assets and liabilities:

(Increase) decrease in assets:Receivables, net (73) 414 (809)Interfund receivables 20 7 89Inventories 153 246Prepaid expenses (13)

(Increase) decrease in deferred outflows (3,330) (442) (1,366)Increase (decrease) in liabilities:

Accounts payable 3,635 24 (940)Interfund payables 4,825 37 (709)Claims liability (14,627)Claims adjustment liability 4,631Compensated absences 122 156Unearned revenue 186 (390)Pension liability 3,546 425 1,677Other liabilities (32)

Increase (decrease) in deferred inflows 1,928 280 727Net Cash Provided (Used) by Operating Activities $ (36,940) $ (1,563) $ 208

Noncash Investing, Capital, and Financing ActivitiesChange in fair value of investments $ $ $ (588)Contributions of capital assets 216Capital assets acquired through leases 44

Total Noncash Investing, Capital, and Financing Activities $ 216 $ 44 $ (588)

StateParks Park


HorseKentucky

41

Enterprise Funds

$ 189,206 $ 732,792 $ 1,105,231 $ 29,4971,459,621 1,461,842 214,652

(17,955) (60,964) (82,690)(4,044) (7) (91,483) (102,412)

(1,501,007) (1,586,924) (43,668)49,317 55,060 416

(500) (693,100) (706,734) (2,212)174,638 39,685 176,028 13,583

94 37,853 63,876(93,000) (34,155) (146,323) (2,859)(93,000) (34,061) (108,470) 61,017

(4,398) (30,572)(1,062) (8,479)

(364) (798)662

(5,824) (39,187)

(50,043) (153,220)61,126 6,575

300 15,337(49,743) (76,757) 6,575

31,895 5,624 (15,023) 41,988208,549 3,245 325,638 58,386

$ 240,444 $ 8,869 $ 310,615 $ 100,374

$ 291,844 $ 403,146 $ 650,441 $ (32,293)

16,120 26,662(10,263)

(500) (500) (395)

(2,923) (13,173) (16,564) 5,051(900) (66) (850) 2,426

399 (222)(200) (213) 399(364) (5,502) (5,426)

(10,495) (3,326) (11,102) 4,4263,963 8,116 (3,174)

(23,102) (37,729) 7,120(5,556) (925) (785)

19 297 673(2) (206) (94)

359 6,007 6,428(73,700) (350,857) (424,589)

156 3,091 2,787$ 174,638 $ 39,685 $ 176,028 $ 13,583

$ $ $ (588) $216 71

44 6,989$ $ $ (328) $ 7,060

InternalKentucky

PublicEmployeesHealth Plan

UnemploymentCompensation

Governmental

TotalsJune 30, 2015

ServiceFunds

Activities -

42

FIDUCIARY FUNDS FINANCIAL STATEMENTS

Pension (and Other Post Employment Benefi t) Trust Funds account for monies received for and expenses incurred by the various public employee retirement systems administered by the Com-monwealth. Kentucky uses the following pension (and other post employment benefi t) trust funds:

Kentucky Employees Retirement System County Employees Retirement System Judicial Retirement Plan State Police Retirement System Kentucky Teachers’ Retirement System Legislators’ Retirement PlanKentucky Public Employees’ Deferred Compensation Authority

Agency funds account for monies held by the Commonwealth for custodial purposes only. Kentucky uses the following agency funds:

Commonwealth Choice Program County Fees Trust Fund

Special Deposit Trust Fund

43

COMMONWEALTH OF KENTUCKYSTATEMENT OF FIDUCIARY NET POSITIONALL FIDUCIARY FUNDSJUNE 30, 2015(Expressed in Thousands)

AssetsCash and cash equivalents (Note 5) $ 1,343,832 $ 246,010Investments, net of amortization (Note 5) 33,099Pension trust fund investments (Note 5):

Corporate and government bonds 8,136,501Common stocks 22,258,669Mortgages 234,416Alternatives 856,386Derivatives 1,284,445Real estate 1,682,717 Other 1,531,965

Invested security collateral 1,476,630 552,146Receivables, net 975,907 40,842Prepaid expenses 130Capital assets, net 24,830

Total Assets 39,806,428 872,097

LiabilitiesInvestments - accounts payable 592,911Accounts payable 20,516 185,037Amounts held in custody for others 134,914Obligations under securities lending 1,476,630 552,146Unearned revenue 4,914

Total Liabilities 2,094,971 872,097

Net PositionRestricted for:

Pension and other post employment benefits 37,711,457Total Net Position $ 37,711,457 $

Post EmploymentBenefit) Trust Funds

Pension (and OtherAgencyFunds

44

COMMONWEALTH OF KENTUCKYSTATEMENT OF CHANGES IN FIDUCIARY NET POSITIONALL FIDUCIARY FUNDSFOR THE YEAR ENDED JUNE 30, 2015(Expressed in Thousands)

AdditionsContributions:

Employer $ 1,534,834Member 891,607Non-Employer 548,536

Total Contributions 2,974,977

Other Contributions:Recovery income 22,998Participant fees 7,437Other receipts 23,531

Total Other Contributions 53,966

Investment income:Net increase (decrease) in fair value

of investments 576,066Interest 665,336Dividends 211,397Real estate operating income, net 28,785Securities lending income, net 7,046

Total Investment Income 1,488,630

Less: Investment expense 160,449Less: Securities lending expense 1,238

Net Investment Income 1,326,943Total Additions 4,355,886

DeductionsBenefit payments 3,772,226Refunds 55,929Administrative expenses 52,058Self funding insurance costs 246,496Healthcare premiums subsidies 331,583Other deductions, net 9

Total Deductions 4,458,301

Change in Net Position (102,415)

Net Position at July 1 37,813,872Net Position at June 30 $ 37,711,457

Pension (and OtherPost Employment

Benefit) Trust Funds

45

COMPONENT UNITS FINANCIAL STATEMENTS

Major Component Units

Kentucky Housing Corporation

The Kentucky Housing Corporation was authorized under KRS Chapter 198A in 1972 to increase the supply of housing for persons of lower income by making and participating in insured construction loans. The Corporation also makes and participates in insured mort-gage loans when fi nancing is not available from private lenders under reasonable equivalent terms and conditions.

Kentucky Higher Education Student Loan Corporation

The Kentucky Higher Education Student Loan Corporation was empowered by KRS Chapter 164A to fi nance state and federally insured loans to students attending eligible post secondary institutions through direct loans to students and the purchase of student loans from lenders.

Kentucky Lottery Corporation

The Kentucky Lottery Corporation, empowered by KRS 154A, administers the Kentucky State Lottery and operates pursuant to amend-ed section 226 of the Constitution of Kentucky as ratifi ed by voters of the Commonwealth.

Kentucky Public Transportation Infrastructure Authority (KPTIA)

The Kentucky Public Transportation Infrastructure Authority is an independent de jure municipal corporation and political subdivision of the Commonwealth established in 2009 pursuant to KRS Chapter 175B as amended. The authority reviews, approves and monitors certain signifi cant transportation projects. The projects are within the Commonwealth and between the Commonwealth and other states. Universities, Colleges, and Related Entities

The Universities, Colleges, and Related Entities account for all transactions relating to the eight State-supported universities and the system of community colleges and technical schools. These institutions maintain their own fi nancial records and are not part of the central accounting system operated by the Finance and Administration Cabinet. The major component units-universities, colleges, and related entities are:

University of Kentucky University of Louisville Kentucky Community and Technical College System

Non-Major Component Units

The non-major component units are presented beginning on page ……………………………............................................………….214

46

COMMONWEALTH OF KENTUCKYSTATEMENT OF NET POSITIONCOMPONENT UNITSJUNE 30, 2015(Expressed in Thousands)

KentuckyHousing

CorporationAssetsCurrent assets:

Cash and cash equivalents (Note 5) $ 621,961 $ 151,868 $ 190,254 $ 90,268Restricted cash (Note 5)Restricted investments (Note 5)Investments, net of amortization (Note 5) 21,702 18,586 84,561Accounts receivable, net 290,891 117,714 27,221 10,503Interest receivable 1,885 58Inventories 36,196 947 16,827Prepaid expenses 8,513 2,015Other current assets 2,105 10,507 4,694 39,737

Total Current Assets 983,253 301,637 222,227 241,896

Noncurrent assets:Restricted cash (Note 5) 315,522 17,028 26,690Long-term investments (Note 5) 57,343 803,325 68,303 496,036Restricted long-term investments (Note 5) 1,449,215 5,899Long-term receivables, net 338,953 61,002 6,209 682,917Capital assets (Note 6):

Land 73,347 90,524 32,488 1,089Improvements other than buildings 220,461 28,673 15,405Buildings 2,532,165 1,253,445 751,141 5,161Machinery and equipment 932,926 478,483 201,351 5,038InfrastructureOther capital assets

Less: Accumulated depreciationand amortization (1,689,150) (832,205) (451,820) (7,554)

Construction in progress 266,891 33,604 56,016Total Capital Assets 2,336,640 1,052,524 604,581 3,734

Other assets 283 10,402 2,485Total Noncurrent Assets, Net 4,497,956 1,950,180 705,783 1,185,172

Total Assets 5,481,209 2,251,817 928,010 1,427,068Deferred outflows of resources (Note 15) 13,755 851 18,390 6,591


Accounts payable and accruals 293,223 98,961 10,631 39,737Current portion of long-term debt:

Notes payable (Note 15) 600 7,883 42,831Bonds payable (Note 15) 19,067 21,024 32,875Capital lease obligations (Note 10)(Note15) 35,953 4,814 3,034Compensated absences (Note 16) 721 1,214Claims liability

Prize liabilityUnearned revenues 97,861 67,334 9,631Payable from restricted assetsOther current liabilities 25,062 21,841 16,231 56,792

Total Current Liabilities 472,487 221,857 40,741 172,235

Noncurrent liabilities:Notes payable (Note 15) 18,929 53,802Bonds payable (Note 15) 784,172 278,858 914,520Capital lease obligations (Note 10) 132,351 21,365 24,252Prize liabilityCompensated absences (Note 16) 6,579 10,928Net pension liability (Note 8) (Note 15) 383,994 70,519Other long-term liabilities 382,064 127,432 846 16,514

Total Noncurrent Liabilities 1,324,095 481,457 420,020 1,001,553Total Liabilities 1,796,582 703,314 460,761 1,173,788

Deferred inflows of resources (Note 15) 241,124 3,671 17,686 906

Net PositionNet investment in capital assets 1,422,560 670,437 577,295 3,734Restricted for:

Debt service 724 16,435 219,745Capital projects 128,734 30,603 25,871Other purposes (Note 1) 907,606 768,143 81,739 25,660

Unrestricted 997,634 60,065 (216,952) 9,826Total Net Position $ 3,457,258 $ 1,545,683 $ 467,953 $ 258,965

Kentucky

KentuckyUniversity

UNIVERSITIES, COLLEGES, AND RELATED ENTITIES

University Communityof of

Louisville College Systemand Technical

47

KentuckyKentucky Public Transportation

Lottery InfrastructureCorporation Authority

$ 13,851 $ 3,775 $ 124,653 $ 436,186 $ 1,632,8162,376 70,076 72,452

83,823 83,8236,538 386,899 518,286

217 35,177 199,192 680,91512,610 212 2,128 16,893

8,300 62,270656 67 15,711 26,962

135,304 711 5,743 198,801162,638 48,644 208,688 1,124,235 3,293,218

62,804 208,982 631,0268,360 20,194 210,977 1,664,538

148,125 304,629 1,907,8681,031,374 936,960 3,057,415

442 100,751 298,641350 244,013 508,902

7,647 2,676,291 7,225,85012,367 22,374 432,690 2,085,229

23,421 23,4217,088 142,463 149,551

(12,053) (24,124) (1,632,961) (4,649,867)830,584 120,829 1,307,924

314 6,689 861,093 2,084,076 6,949,651247 18,570 31,987

1,102,852 27,130 1,009,218 3,764,194 14,242,4851,265,490 75,774 1,217,906 4,888,429 17,535,703

4,149 87,618 131,354

13,193 10,240 36,377 86,181 588,543

16,445 15,386 83,145850 57,367 131,183

11,900 55,7012,344 139 25,629 30,047

1,999 1,99927,820 27,820

38,181 213,0076,366 6,366

21,435 141,36132,832 38,199 36,377 264,444 1,279,172

21,763 94,4941,064,673 760,715 845,808 4,648,746

134,638 312,60615,697 15,697

1,020 932 19,45971,434 1,662,515 2,188,462

59,220 586,0761,136,107 16,717 760,715 2,724,876 7,865,5401,168,939 54,916 797,092 2,989,320 9,144,712

20,931 86,192 370,510

314 6,689 429,760 1,303,287 4,414,076

62,599 2,503 302,00657,249 242,457

10,571 1,673,198 3,466,9176,285 14,169 (8,946) (1,135,702) (273,621)

$ 79,769 $ 20,858 $ 420,814 $ 1,900,535 $ 8,151,835

All ComponentUnits

Kentucky HigherEducation Non-Major

TotalsJune 30, 2015

Student Loan

AUTHORITIES

ComponentUnitsCorporation

48

COMMONWEALTH OF KENTUCKYSTATEMENT OF ACTIVITIESCOMPONENT UNITSFOR THE YEAR ENDED JUNE 30, 2015(Expressed in Thousands)

KentuckyHousing

CorporationExpenses:

Operating and other expenses $ 2,609,253 $ 1,107,874 $ 639,110 $ 294,262Total Expenses 2,609,253 1,107,874 639,110 294,262

Program Revenues:Charges for services 2,084,282 681,277 104,978 93,745Operating grants and contributions 407,085 165,833 89,343 208,579Capital grants and contributions 45,872

Total Program Revenues 2,537,239 847,110 194,321 302,324Net Program (Expense) Revenue (72,014) (260,764) (444,789) 8,062

General Revenues:Unrestricted grants and contributions 113,264 111,063 225,963Unrestricted investment earnings 15,435 (28,978) 1,775Gain on sale of capital assetsMiscellaneous general 256,721 150,360 202,777

Total General Revenues 385,420 232,445 430,515

Change in Net Position 313,406 (28,319) (14,274) 8,062

Net Position at July 1, As Restated (Note 2) 3,143,852 1,574,002 482,227 250,903Net Position at June 30 $ 3,457,258 $ 1,545,683 $ 467,953 $ 258,965

KentuckyCommunity

ofUniversity

CollegeLouisville SystemKentucky

of

UNIVERSITIES, COLLEGES, AND RELATED ENTITIES

University and Technical

49

KentuckyPublic

Kentucky TransportationLottery Infrastructure

Corporation Authority

$ 33,507 $ 893,567 $ 39,241 $ 1,773,060 $ 7,389,87433,507 893,567 39,241 1,773,060 7,389,874

33,532 886,930 764,728 4,649,472368,682 1,239,522

91,947 12,107 149,92633,532 886,930 91,947 1,145,517 6,038,920

25 (6,637) 52,706 (627,543) (1,350,954)

219,678 669,968716 12,596 1,544

51 51348 425,831 1,036,037

716 348 658,156 1,707,600

25 (5,921) 53,054 30,613 356,646

79,744 26,779 367,760 1,869,922 7,795,189$ 79,769 $ 20,858 $ 420,814 $ 1,900,535 $ 8,151,835

AUTHORITIESAll

UnitsNon-MajorComponent

KentuckyHigher

EducationComponent Totals

CorporationStudent Loan

Units June 30, 2015

51

NOTES TO FINANCIAL STATEMENTS

COMMONWEALTH OF KENTUCKYNotes to the Financial StatementsJune 30, 2015

52

INDEX FOR NOTES

TO THE FINANCIAL STATEMENTS

Note 1 Significant Accounting Policies .............................................................................................53

Note 2 Changes in Accounting Principles, Reporting Practices, and Prior-Period Adjustments .................................................................................................67

Note 3 Stewardship, Compliance, and Accountability ......................................................................69

Note 4 Disaggregation of Accounts Payable and Accounts Receivable ............................................70

Note 5 Equity in Pooled Cash and Investments, Cash, and Investments ..........................................72

Note 6 Capital Assets .........................................................................................................................84

Note 7 Interfund Transactions ...........................................................................................................86

Note 8 Pension Plans and Other Post Employment Benefits ............................................................88

Note 9 Employee Benefit Plan ........................................................................................................ 110

Note 10 Lease Obligations ................................................................................................................ 110

Note 11 Risk Management ................................................................................................................ 111

Note 12 Risk Pools ............................................................................................................................ 112

Note 13 Defeasance of Long-Term Debt ........................................................................................... 115

Note 14 Related Organizations ..........................................................................................................121

Note 15 Long-Term Obligations .........................................................................................................121

Note 16 Commitments and Contingencies ........................................................................................131

Note 17 Subsequent Events .................................................................................................................134


53

Note 1

SIGNIFICANT ACCOUNTING POLICIES

A. Basis of Presentation

The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America for state governments as prescribed by the Governmental Accounting Standards Board (GASB) and the American Institute of Certified Public Accountants. The financial statements for the Universities, Colleges, and Related Entities Funds have been prepared according to standards established by GASB Statement 35.

B. Financial Reporting Entity

For financial reporting purposes, the Commonwealth of Kentucky includes all fund types, departments, and agencies of the Commonwealth, as well as boards, commissions, authorities, corporations, colleges, and universities. These organizational units comprise the reporting entity of the Commonwealth and are reported in accordance with GASB 14, as amended by GASB 39 and GASB 61. Consequently, the reporting entity includes organizations that are not legally separate from the primary government and also those that are legally separate. Organizations not legally separate are reported as part of the primary government. Legally separate organizations are reported as component units if either the Commonwealth is financially accountable for the organization or when exclusion of the organization would cause the Commonwealth’s financial statements to be misleading or incomplete.

Component units may be blended or discretely presented. Blended component units are those that either provide services exclusively or almost entirely to the primary government, or their governing bodies are substantively the same as that of the primary government. Amounts related to blended component units are included as if the component units were part of the primary government. All other component units are discretely presented, or shown separately from the primary government.

Audited financial statements are available for the following blended component units: Kentucky Retirement System, Kentucky Teachers’ Retirement System, Judicial Form Retirement System, Kentucky Public Employees’ Deferred Compensation Authority, and the Turnpike Authority of Kentucky. Audited financial statements are available for all discretely presented component units except the Kentucky Agricultural Finance Authority, and the Kentucky Grain Insurance Corporation. (See pages 136 and 137 for a complete list of component units’ addresses.)

Blended Component Units

The following legally separate organizations provide services entirely or almost entirely to the State or otherwise exclusively, or almost exclusively, that benefit the State, and therefore, these organizations’ balances and transactions are reported as though they were part of the State’s primary government by using the blending method.

Kentucky Retirement System (KRS 61.645)

The Kentucky Retirement System administers the Kentucky Employees Retirement System, the County Employees Retirement System, and the State Police Retirement System. The board consists of the Commissioner of the Department of Personnel, five members elected by the retirement systems, and three members appointed by the Governor.

Kentucky Teachers’ Retirement System (KRS 161.220)

The Kentucky Teachers’ Retirement System is an independent agency and instrumentality of the Commonwealth. It provides pension benefit plan coverage to employees of local school districts and educational agencies of the State. The board includes two ex officio members and seven elected members.

Judicial Form Retirement System (KRS 21.530)

The Judicial Form Retirement System accounts for monies and securities, including contributions and earnings, which will be used to pay benefits to the members of the Legislators’ Retirement Plan and the Judicial Retirement Plan. The board consists of eight members; three are appointed by the Supreme Court, two by the Governor, one by the President of the Senate, one by the Speaker of the House of Representatives, and one by the President and Speaker jointly.

Turnpike Authority of Kentucky (KRS 175.430)

The Turnpike Authority is a body corporate and politic. It was created solely to perform essential governmental functions and to serve the public purposes of constructing, acquiring, financing, and operating turnpike and other road projects for the use, safety, convenience and general welfare of the traveling public, by leasing such projects to the Transportation Cabinet. The Governor and six other ex officio members comprise the authority.

Kentucky Public Employees’ Deferred Compensation Author-ity (KRS 18A.230 to 18A.275)

The Kentucky Employees’ Deferred Compensation Authority ad-ministers two deferred compensation plans as authorized by sec-tions 457 and 401(k) of the United States Internal Revenue Code. The plans are defined contribution plans with 762 participating employers. Under provisions of the Plans, employees of the Com-


54

Kentucky School Facilities Construction Commission (KRS 157.617)

This commission is an independent corporate agency and instru-mentality of the Commonwealth. The purpose of the commission is to assist local school districts in meeting the school construction needs of the Commonwealth in a manner that will ensure an equi-table distribution of funds based upon unmet needs. One ex officio member and eight members appointed by the Governor comprise the commission.

Administrative Entities

The State Property and Buildings Commission, Kentucky Asset/Liabilities Commission, Kentucky Tobacco Settlement Trust Cor-poration, Kentucky Gas Pipeline Authority, and the Board of Ag-riculture are legally separate entities of an administrative nature. They are comprised of elected and appointed officials from vari-ous state agencies, and have no cost associated with them. There-fore, there is no separate presentation for these entities.

State Property and Buildings Commission (KRS 56.450)

This commission is a public body corporate that issues all revenue bonds for state agencies, unless those agencies are specifically au-thorized by other provisions of the Kentucky Revised Statutes to is-sue bonds. The commission is composed of six ex officio members. Kentucky Asset/Liability Commission (KRS 56.861)

This commission is a public body corporate that takes a compre-hensive view of the Commonwealth's finances and develops poli-cies and strategies to minimize the impact of fluctuating revenue receipts and interest rates on the Commonwealth's interest-sensi-tive assets and liabilities. The commission consists of five ex of-ficio members.

Kentucky Tobacco Settlement Trust Corporation (KRS 248.480)

The Kentucky Tobacco Settlement Trust Corporation is a public body corporate that performs essential governmental and public functions by assisting in the implementation of the national to-bacco grower settlement trust agreement. The board of directors is comprised of five ex officio members and nine members appointed by the Governor with the advice and consent of the Senate and House of Representatives.

Kentucky Gas Pipeline Authority (KRS 353.752)

This authority is a body corporate and politic to provide a financ-ing mechanism for projects that will increase severance tax rev-enue for Kentucky, create jobs for Kentuckians, and create a com-petitive advantage in environmentally responsible development. The authority consists of nine members, the Secretary of the Fi-nance and Administration Cabinet, the Secretary of the Commerce Cabinet, the Secretary of the Environmental and Public Protection Cabinet, a member designated by the Kentucky Oil and Gas As-sociation, a member designated by the Kentucky Society of Pro-fessional Engineers, a member designated by the Kentucky Gas Association, a citizen member appointed by the governor, and two legislative members.

Board of Agriculture (KRS 246.120)

This board is a body corporate that acts as an advisory board to the Commissioner of Agriculture, aids in the collection of information concerning crops, promulgates industrial information, and acts as an immigration committee. The board consists of five ex officio members and nine citizens of the Commonwealth appointed by the Governor.

Discretely Presented Component Units

The component units’ column in the combined financial state-ments includes the data of the discretely presented component units described below. The component units are legally sepa-rate entities. However, there is a financial interdependence or the primary government controls the selections of the board and operations. They are reported together in a separate column to reflect that they are legally separate, but their interdependence requires that they be included as part of the reporting entity. Bluegrass State Skills Corporation (KRS 154.12-205)

This corporation attempts to improve and promote employment opportunities of the Commonwealth’s citizens by assisting the Kentucky Cabinet for Economic Development in creating and expanding programs offering skills, training and education. The board of directors consists of six ex officio members and twelve members appointed by the Governor. The Commonwealth has the ability to impose its will and there also exists a financial benefit/burden relationship.

Kentucky Public Transportation Infrastructure Authority (KRS 175B.15)

This authority is an independent de jure municipal corporation and political subdivision of the Commonwealth. The authority reviews, approves and monitors certain significant transportation projects within the Commonwealth and between the Common-

monwealth and agencies thereof, including persons in the public school systems, universities, or local governments, are eligible to contribute on a pre-tax basis through payroll deductions. In no event shall the 457, 401(k) or Deemed IRA trust Funds be used for, or diverted to, purposes other than the exclusive benefit of the participants and beneficiaries or in the payment of the expenses of the Plans and Trust.


55

wealth and other states. If necessary the authority can assist with the operation, financing and management of those projects. The authority consists of eleven voting members. The authority Chair-man, is the Secretary of the Transportation Cabinet. Vice Chair, the Secretary of the Finance and Administration Cabinet, one rep-resentative from the Kentucky Association of Counties, one rep-resentative from the Kentucky County Judges/Executive Associa-tion, one representative from the Kentucky League of Cities and six citizens at large. A financial benefit/burden exists between the Commonwealth and the Authority.

Kentucky River Authority (KRS 151.710)

The Kentucky River Authority possesses the corporate powers that distinguish it as being legally separate from the Commonwealth. The authority is charged with developing comprehensive plans for the management of the Kentucky River Basin. The Governor ap-points the twelve members of this authority. A financial benefit/burden exists between the Commonwealth and the Authority.

Kentucky Housing Corporation (KRS 198A.030)

The Housing Corporation is a body corporate and politic that per-forms essential governmental and public functions in improving and promoting the health and welfare of the citizens of the Com-monwealth by the production of residential housing in Kentucky. The board of directors consists of six ex officio members and eight members appointed by the Governor. The Commonwealth has the ability to impose its will since it may appoint, hire, reassign or dismiss management responsible for operations.

Kentucky Higher Education Student Loan Corporation (KHESLC) (KRS 164A.050)

KHESLC is a body corporate and politic created to perform essen-tial governmental and public functions and purposes in improving and promoting the educational opportunities of the citizens of the Commonwealth. The Corporation is governed by board of direc-tors appointed by the Governor, as prescribed in KRS 164A.050. The Commonwealth provides operating support to the Corpora-tion, creating a financial benefit/burden relationship.

Kentucky State Fair Board (KRS 247.090)

This board is a body corporate that accounts for revenues earned and expenses incurred in the commercial operations of the State Fair Board. Three ex officio members and twelve members ap-pointed by the Governor make up the fifteen-member board. The Commonwealth has the ability to impose it will and there also ex-ists a financial benefit/burden relationship.

Kentucky Center for the Arts Corporation (KRS 153.410) The Center for the Arts is a body corporate created by the Gen-eral Assembly to promote the growth and development of the arts, convention trade, tourism and hotel industries within Jef-ferson County and the Commonwealth. The board consists of fifteen members appointed by the Governor. The Com-monwealth provides significant operating support to the cor-poration, creating a financial benefit/burden relationship.

Kentucky Educational Television Authority (KET) (KRS 168.030)

KET is a public body corporate and politic that prescribes and en-forces regulations governing the use of educational television and television facilities and related functions. KET also produces and transmits educational television programs. The authority consists of nine members. The Governor appoints five of these members. The board elects a liaison between the authority and the depart-ment on matters of curriculum. The Council on Postsecondary Education elects a representative of the University of Kentucky and a representative of the other state universities. The author-ity's members elect a chairman. A component unit of KET is the Kentucky Educational Television Foundation. The foundation is a non-profit Kentucky corporation that receives, holds and adminis-ters gifts and grants in the name of and with the approval of the au-thority. The Commonwealth provides significant operating support to the Authority, creating a financial benefit/burden relationship.

Kentucky Economic Development Finance Authority (KED-FA) (KRS 154.20-010)

KEDFA possesses the corporate powers necessary to distinguish it as legally separate from the Commonwealth. It was established to assist business enterprises in obtaining financial resources in or-der to promote the Commonwealth's long-term economic growth. The Kentucky Economic Development Partnership board appoints the five members of this authority. Additionally, other component units of the authority include The Kentucky Industrial Develop-ment Authority, the Kentucky Industrial Revitalization Authority, the Kentucky JOBS Development Authority, and the Kentucky Mortgage Insurance and Guarantee Corporation. The financial statements of the component units are combined with those of the authority. Commonwealth funds may be used for operating support to the Authority, creating a financial benefit/burden relationship. Kentucky Higher Education Assistance Authority (KHEAA) (KRS 164.742)

This authority is a body corporate and politic that operates to im-prove the higher education opportunities of persons who are attend-ing or planning to attend eligible institutions by insuring eligible student loans. The authority is governed by a board of directors


56

also oversees the Kentucky Educational Savings Plan Trust and the Commonwealth Postsecondary Education Prepaid Trust Fund, also known as Kentucky’s Affordable Prepaid Tuition (KAPT), both of which are component units of KHEAA. Commonwealth funds are appropriated for program and operating support to the Authority, creating a financial benefit/burden relationship Kentucky Council on Postsecondary Education(KRS 164.011)

This council was established in 1997 under the direction of the Kentucky Postsecondary Education Improvement Act. The board consists of 16 members--13 citizens appointed by the Governor, one faculty member, one student, and the Commissioner of Edu-cation. This council coordinates change and improvement in Kentucky’s postsecondary education system. This council strives to increase literacy, improve work-related skills, and to raise the number of students attending college and completing college de-grees. The Commonwealth provides significant operating support to the Council, creating a financial benefit/burden relationship. Kentucky Infrastructure Authority (KRS 224A.030)

This authority is a body corporate and politic created to perform essential governmental functions and to serve the local public agencies of the Commonwealth with respect to the construction and acquisition of infrastructure projects. The board consists of five ex officio members and five members appointed by the Gov-ernor. The Commonwealth provides significant operating support to the Authority, creating a financial benefit/burden relationship.

Kentucky Agricultural Finance Corporation (KAFC) (KRS 247.944)

KAFC is a corporation that seeks to improve and promote the health and general welfare of the Commonwealth's people through the advancement of agriculture. The board of directors consists of three ex officio members and nine members appointed by the Governor. The Commonwealth provides significant operating support to the Corporation, creating a financial benefit/burden re-lationship.

Kentucky Grain Insurance Corporation (KGIC) (KRS 251.620)

KGIC is a body politic created to promote the Commonwealth’s welfare by improving the economic stability of agriculture and protecting grain producers in the event of a financial failure of a grain dealer or warehouseman. The board of directors consists of four ex officio members and six members appointed by the Com-missioner of the Department of Agriculture. The Commonwealth is responsible for any insufficiency of funds to pay claims creating a financial benefit/burden relationship.

Kentucky Local Correctional Facilities Construction Author-ity (KRS 441.615)

This authority is a body corporate and politic created to provide an additional and alternative method of constructing, reconstruct-ing, improving or repairing, and financing jails and appurtenant facilities for any local government in the Commonwealth. The membership consists of six ex officio members and four members appointed by the Governor. The Commonwealth provides funds, staff assistants, facilities and materials required by the Authority in the conduct of its duties and activities, creating a financial benefit/burden relationship. Appalachian/Kentucky Artisans Gateway Center Authority (KRS 148.561) (The Kentucky Artisan Center)

This authority is an independent, de jure municipal corporation and is a body corporate and politic. It is governed by a board of directors consisting of thirteen members. The authority operates and manages the Kentucky Artisan Center at Berea. The Common-wealth provides significant operating support to the Authority, cre-ating a financial benefit/burden relationship.

Kentucky Lottery Corporation (KRS 154A.020)

The Kentucky Lottery Corporation is empowered by the Legisla-ture to administer the Kentucky state lottery games. The board of directors is comprised of one ex officio member and seven mem-bers appointed by the Governor with the advice and consent of the Senate. The Kentucky Lottery Corporation provides significant revenues to the Commonwealth creating a financial benefit/burden relationship.

Kentucky Horse Park Foundation, Incorporated

This foundation is a legally separate tax-exempt Kentucky corpo-ration that receives, holds, and administers gifts and grants in the name of the Kentucky Horse Park (the Park). Although the Park does not control the timing or amount to receipts from the Founda-tion, the majority of resources or income thereon that the Founda-tion holds and invests is restricted by the donors to the activities of the Park. The Foundation’s fiscal year ended May 31, 2015 and amounts included are for the year then ended. The Commonwealth provides significant operating support to the Foundation, creating a financial benefit/burden relationship.

Universities, Colleges, and Related Entities (KRS 164.350)

Each board of regents or board of trustees is appointed by the Governor, and constitutes a body corporate with the power to receive and administer revenue and property. Commonwealth funds are appropriated for program and operating support to these entities, creating a financial benefit/burden relationship.


57

Restricted Net Position(Expressed in Thousands)

Primary GovernmentBusiness Major

Restricted for Type Component Other Purposes: Activities Units

Loans $ $ 47,981 Education 11,039 Instruction 3,701 Scholarships and Fellowships 1,055,206 Research 666,487 Claims 61,774 Public Service 9,305

Totals $ 61,774 $ 1,793,719

Sales and Use Tax $ 3,292,068 Motor Fuels Tax 844,819 Motor Vehicles Usage Tax 433,061 Healthcare Provider Tax 300,322 Tobacco Products Tax 248,834 Insurance Premiums Tax 152,122 Limited Liability Entity Tax 230,632 Alcoholic Beverage Tax 132,671 Telecommunications Tax 65,137 Transient Room Tax 12,393 Parimutel and Race Track Admission Tax 2,241 Total Sales and Gross Receipts Tax $ 5,714,300

Sales and Gross Receipts Tax(Expressed in Thousands)

C. Government-Wide Financial Statements

Government-Wide Financial Statements - The Statement of Net Position and Statement of Activities report information on all gov-ernmental and business-type activities of the primary government and its non-fiduciary component units. Governmental activities are generally characterized by their use of taxes, intergovernmen-tal revenues, and other non-exchange revenues as funding sources. Business-type revenues come mostly from fees charged to exter-nal parties for goods or services. Fiduciary funds and fiduciary component units are not included in government-wide financial statements due to the unavailability of fiduciary funds to aid in the support of government programs.

The government-wide statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the proprietary and pension and other employee benefit trust fund financial statements. Revenues are recognized when earned and expenses are recorded when a liability is incurred, regardless of the timing of cash flows. Property taxes are recognized as rev-enues in the year for which they are levied. Grants and similar items are recognized as revenues once provider-imposed eligibil-ity requirements have been met.

The Statement of Net Position presents the reporting entity’s non-fiduciary assets and liabilities with the difference between the two shown as net position. Net position is reported in three categories:

(1) Net investment in capital assets, consist of capital as-sets, net of accumulated depreciation and further reduced by debt net of cash balances, for debt related to the ac-quisition, construction, or improvement of those assets.

(2) Restricted net position result from constraints placed on net position by creditors, grantors, contributors, and other external parties, including those constraints imposed by law through constitutional provisions or enabling legislation.

(3) Unrestricted net position are those net position that do not meet the definition of restricted net position or invested in capital assets.

When restricted assets and unrestricted assets are both available for a particular purpose, the Commonwealth’s objective is to use any restricted funds first, since unrestricted funds are available for any purpose and provide for greater financial flexibility. If the rules governing restricted assets are met, restricted assets may be the only funds used. However, there may be instances in which restricted funds may only be spent in proportion to unrestricted funds spent. Assets shown as restricted for “other purposes” for the Primary Government and Component Units are as follows:

A significant feature of the government-wide Statement of Activi-ties is the presentation of each program’s net cost. GAAP require the reporting of a program’s net cost to indicate how self-sustain-ing the program is and to reveal the extent of reliance on other governmental units. Net cost is obtained by subtracting program expenses from program revenues. Program expenses are those costs attributable to a particular function including certain indirect costs. GAAP permit both direct and indirect program expenses to be presented together in an “Expenses” column. Therefore, indi-rect expenses are not specifically identified with individual func-tions and activities.

Program revenues are resources that derive directly from the pro-gram itself or from parties outside the government that reduce the total expense of the benefiting functional activity to arrive at the net expense of the activity. The Statement of Activities categoriz-es program revenues into three groups: charges for goods, services, and other benefits; operating grants and contributions; and capital grants and contributions. Revenues not considered program rev-enues are classified as general revenues. General revenues include all taxes regardless of type. The sales and gross receipts taxes re-flected on the statement of activities for the governmental activi-ties include various taxes that are computed using sales price or gross receipts of the reporting entity. For fiscal year 2015, the total amount of sales and gross receipts tax reported in the government wide statements was $5,714,299,000 and comprised of:


58

D. Fund Financial Statements Primary Government - The accompanying financial statements are structured into three fund categories including governmental funds, proprietary funds, and fiduciary funds. Funds are charac-terized as either major or non-major. Major funds are those funds whose assets, liabilities, revenues, or expenditures/expenses are at least ten percent of the corresponding total (assets, liabilities, etc.) for all funds of that category or type (governmental or enterprise funds), and whose total assets, liabilities, revenues, or expenditures/expenses are at least five percent of the corresponding total for all governmental and enterprise funds combined. The Commonwealth’s major funds are identified herein.

Governmental Funds

All governmental fund statements are accounted for on the modi-fied accrual basis of accounting and focus on the flow of current financial resources. In accordance with the modified accrual basis of accounting, revenues are recognized when they become both measurable and available to finance expenditures of the fiscal pe-riod. Revenues are considered to be available when they are either collected within the current period or their collection is expected shortly after the end of the current period in time to meet current liabilities. The State generally includes those revenues to be re-ceived up to 30 days following the end of the accounting period. Revenues expected to be collected after 30 days beyond the end of the fiscal year are considered unavailable and are reported as deferred inflows. Unearned revenue are reported as amounts received but unearned as of June 30.

Principal revenue sources accounted for on the modified accrual basis include federal grants, sales and use tax, coal severance tax, property tax, departmental fees, income taxes, and interest income. Motor vehicle registration fees and fines and forfeitures are accounted for on the cash basis. Generally and except as otherwise provided by law, property taxes are assessed as of January 1, levied (mailed) September 15, due at discount November 1, due at face value December 31, delinquent January 1 following the assessment, and subject to lien and sale February 1 following the delinquency date.

In governmental funds, where the focus is on the flow of current resources, expenditures are usually recorded at the time liabilities are incurred. Exceptions are: inventories, prepayments, and acquisition of capital assets which are recorded at the time of acquisition; and principal and interest on long-term debt, as well as compensated absences which are recorded as expenditures in the period payment is made.

A description of major governmental funds follows:

General Fund - a major fund that accounts for and reports all financial resources appropriated by the General Assembly which are not required to be accounted for in another fund.

Special Revenue Funds - a category of governmental funds that accounts for the proceeds of specific revenue sources, other than for major capital projects, which are restricted or committed to expenditures for a specific purposes.

Included in this category are such funds as the transportation fund, federal fund, and agency revenue fund.

Transportation Fund - a major fund that accounts for and reports the proceeds of taxes, fees, and charges that are re-stricted or committed to activities related to the preservation and maintenance of roads. Federal Fund - a major fund that accounts for and reports monies received from the federal government that are restricted or committed to specific programs and operations.

Agency Revenue Fund- a major fund that accounts for and reports restricted taxes, fees, and charges that are restricted or committed to expenditure for a particular function or activity.

Capital Projects Fund - a major fund that is used to account for and report financial resources that are restricted, committed or assigned for capital outlay as appropriated by the General Assembly for the acquisition, construction, or renovation of major capital facilities, and for the acquisition of major equipment, other than those financed by proprietary funds and certain trust funds.

Debt Service Fund – a major fund used to account for and report financial resources which are restricted, committed, or assigned to expenditures for the repayment of general long-term obligations principle, interest, and related administrative costs.

Proprietary Funds

Proprietary funds use the full accrual basis of accounting, recognizing revenues and expenses when they occur, regardless of the timing of the cash flows. On the statement of revenues, expenses, and changes in net position, the term “expenses” (not “expenditures” as in gov-ernmental funds on a modified accrual basis) describes decreases in economic benefits and emphasizes the accrual basis of accounting.

Proprietary funds’ revenues and expenses are divided into operating and nonoperating revenues and expenses. Although not specifically defined by GAAP, operating revenues and expenses are considered to be those resources gained and consumed to produce and deliver goods and services that are central to that fund’s particular purpose. Other revenues and expenses are classified as nonoperating. Operat-ing and nonoperating expenses are further characterized by object (personal services, depreciation expense, travel expense, etc.).


59

Enterprise Funds - a category of proprietary funds used to account for those public corporations empowered by the Kentucky Revised Statutes (KRS) to provide certain services to the citizens of the Commonwealth and the operations of State agencies that provide goods or services to the general public on a user charge basis. Also included are the operations of the State’s risk management pools.

State Parks Fund - a major fund that accounts for revenues earned and expenses incurred in the commercial operations of the Depart-ment of Parks.

Kentucky Horse Park Fund - a major fund that accounts for rev-enues earned and expenses incurred in the commercial operations of the Kentucky Horse Park.

Insurance Administration Fund - a major fund that accounts for insurance risk pools operated by the State, including the Work-ers’ Compensation Special Fund, Coal Workers’ Pneumoconiosis Fund, Petroleum Storage Tank Environmental Assurance Program, Mine Subsidence Insurance Program, and Kentucky Reclamation Guaranty Fund.

Kentucky Public Employees Health Plan – a major fund that ac-counts for the revenues and expenses incurred in the commercial operation of the health insurance program for state employees, boards of education, and quasi-governmental agencies.

Unemployment Compensation Fund - a major fund that accounts for assessed employer contributions collected and related unemploy-ment compensation payments to recipients.

Internal Service Funds - a category of proprietary funds that ac-counts for financing goods and services provided by one agency of the Commonwealth primarily to other agencies or governments on a cost reimbursement basis. All of the proprietary funds (where the measurement focus is on the flow of economic resources) are accounted for on the accrual basis of accounting. Accordingly, revenues are recognized when they are both earned and measur-able. Expenses are recognized at the time liabilities are incurred.

Since internal service funds usually exist to support governmental activities, they are normally included as part of the governmental activities reported in the government-wide statements, rather than being presented separately.

Specific activities reported under Internal Service Funds are:1. Management/maintenance of State motor vehicle fleet2. Industrial prison operations3. Rental and maintenance operations for buildings4. Computer and related data processing services

5. Printing services6. Fire and tornado insurance programs7. State workers’ compensation program8. Transportation Cabinet self-insured workers’ compensation trust program

Fiduciary Funds

Fiduciary funds are defined as funds used to report assets held in a trustee or agency capacity for others and which, therefore, cannot be used to support the government’s own programs. This category of funds includes pension (and other employee benefit) trust funds, investment trust funds, and agency funds. The Commonwealth’s fiduciary fund types are described below.

Pension and (Other Post Employment Benefit) Trust Funds – account for monies received for, expenses incurred by, and assets available for plan benefits of the various public employee retirement systems. This fund type also accounts for monies held in deferred compensation plans. Pension Trust Funds are accounted for on the accrual basis of accounting and reported in the same manner as proprietary fund types.

Agency Funds – account for monies held by the Commonwealth for custodial purposes only. Unlike other funds, the agency fund reports assets and liabilities only; therefore, it has no measurement focus. However, the agency fund uses the accrual basis of account-ing when recognizing payables and receivables.

Specific activities listed under the Commonwealth’s Agency Funds are:1. Commonwealth Choice benefit spending accounts2. Special Deposit Trusts holding monies for specific purposes3. County Fees Fund holding monies for Kentucky Counties with a population of 70,000 or more

As discussed previously, because the fiduciary fund resources are not available to support government programs, fiduciary funds (and component units that are fiduciary in nature) are excluded from the government-wide financial statements. Inclusion of these funds would create a misleading view of the government’s net position.


60

E. Presentation of Component Units

Presentation of the underlying fund types of the individual compo-nent units (described previously) reported in the discrete column is available from each respective component unit’s separately issued financial statements.

The Major Discretely Presented Component Units, including Col-leges and Universities are:

Kentucky Community and Technical College System Kentucky Housing Corporation Kentucky Higher Education Student Loan Corporation Kentucky Lottery Corporation Kentucky Public Transportation Infrastructure Authority University of Kentucky University of Louisville

The Non-Major Discretely Presented Component Units, including Universities, Colleges, and Related Entities are:

Bluegrass State Skills Corporation Kentucky Agricultural Finance Corporation Kentucky Artisan Center at Berea Kentucky Center for the Arts Corporation Kentucky Economic Development Finance Authority Kentucky Educational Television Authority Kentucky Grain Insurance Corporation Kentucky Horse Park Foundation Kentucky Higher Education Assistance Authority Kentucky Infrastructure Authority Kentucky Local Correctional Facilities Construction Authority Kentucky River Authority Kentucky State Fair Board Kentucky Council on Postsecondary Education Eastern Kentucky University Kentucky State University Morehead State University Murray State University Northern Kentucky University Western Kentucky University

The Commonwealth has significant transactions with its compo-nent units, primarily in providing operating funds to the universi-ties from the State’s general fund. During fiscal year 2015, the primary government provided $279,611,300 to the University of Kentucky, $190,162,300 to the Kentucky Community and Techni-cal College System, $139,714,688 to the University of Louisville, and $198,977,887 to the Kentucky Higher Education Assistance Authority. The Commonwealth contributed capital in the amount of $91,947,020 to the Kentucky Public Transportation Infrastructure Authority. In addition, the State received $233,067,958 in proceeds from the Kentucky Lottery Corporation.

F. Cash and Cash Equivalents

In addition to amounts held in bank accounts, cash on hand, and imprest cash, this classification includes short-term investments with an original maturity of 90 days or less (from date of purchase). Cash equivalents are generally stated at cost, which approximates market. Deferred Compensation amounts are reported at fair value. Short-term investments classified as cash equivalents at June 30, 2015 are $1,363,601,000.

G. Investments

This classification includes long-term investments that are stated at fair value. Investments of the Deferred Compensation Plan are reported at fair value. See Note 5 for investment details.

H. Securities Lending

Cash and securities received as collateral on securities lending transactions are reported as assets in the accompanying financial statements. Liabilities resulting from the securities lending transac-tions are also reported. Certain component units of the state have deposits in the Commonwealth’s Investment Pool, which participates in securities lending activities. The component units’ position in the pool and related securities lending assets and liabilities are reported in an agency fund.

I. Receivables

Receivables in the Commonwealth’s governmental and fiduciary funds primarily consist of Federal revenues, taxes, and interest on investments. Some governmental fund revenues are not susceptible to accrual prior to receipt, including licenses, fees, permits, and similar revenues that are recognized on the cash basis. Receivables in all other funds have arisen in the ordinary course of business. Receivables in the governmental funds are reported net of allowances for uncollectibles. Disaggregation of current accounts receivable and current taxes receivable are shown in Note 4.

J. Interfund Transactions

The Commonwealth has the following types of interfund transactions:

Interfund services provided and used - Charges for services rendered by one fund to another are treated as revenues of the recipient fund and expenditures or expenses of the disbursing fund.

Reimbursements - Reimbursement of expenditures made by one fund for another are recorded as expenditures in the reimbursing fund and as a reduction of expenditures in the reimbursed fund.

Transfers presented in the fund financial statements represent the flow of assets (such as goods or cash) without equivalent flow of


61

assets in return or requirement of repayment. In addition, transfers are recorded when a fund receiving revenue provides it to the fund that expends the resources.

The composition of the interfund transactions is presented in Note 7. Note that at the entity-wide level, the majority of interfund activity has been eliminated. This is to avoid the “doubling up” of such transactions so that revenues and expenses will not be reported more than once.

Transfers and receivables and payables between governmental ac-tivities and business-type activities have not been eliminated. Also, remaining are the results of activities between different functional categories. For example, services provided and used are not elimi-nated because doing so would misstate the expenses of purchasing function and the program revenues of the selling function.

K. Inventories and Prepaid Expenses

Inventories in the governmental funds and similar trust funds consist of expendable supplies held for consumption, the costs of which are recorded as an expenditure at the time of purchase.

Prepaid expenses, including the prepayment of services to vendors (e.g., prepaid insurance), are recorded similarly in the governmental fund statements.

Reserves of fund balance have been established for the inventory balances for governmental funds. Inventories in the proprietary funds and similar trust funds consist of both expendable supplies held for consumption and the cost of goods held for resale, the costs of which are recorded as an expense as they are used.

Inventories are valued at cost (first-in, first-out, or average cost). In the Governmental Activities column of the government-wide State-ment of Net Position, inventory and prepaid expenses are reported as an asset at cost when purchased, then expensed as used.

L. Capital Assets and Depreciation

Included in capital assets are real property, equipment, intangible assets and infrastructure (e.g. roads, bridges, sidewalks and similar items). These are reported in the government-wide statement of net position, as governmental or business type activities. Capital assets are expensed at the time of acquisition in the fund financial statements for governmental and similar trust funds.

The policy of the primary government is to capitalize assets when the useful life is greater than one year and the acquisition cost meets the capitalization threshold. The primary government capitalizes all land and infrastructure. Buildings, improvements to land, and equipment are capitalized when the acquisition cost is $5,000 or greater. Intangible capital assets are capitalized when the cost is

$100,000 or more except software which has a threshold of $500,000. Component units establish their own capitalization policy and that policy may vary from that of the primary government.

The Kentucky Historical Society, Kentucky Horse Park and Ken-tucky Department of Parks hold and care for the State’s historical treasures. Among these are historical clothing; china; furniture and other furnishings; a variety of art and decorative art; politi-cal memorabilia; pioneer tools and equipment; guns and similar military artifacts; books, manuscripts, and photographs; musical instruments from Kentucky’s musical legends; Native American artifacts; fossilized bones and prehistory artifacts. These assets are not capitalized or depreciated as the assets could not be valued and have inexhaustible useful lives.

The primary government values capital assets at historical cost, estimated historical cost or fair market value at the time of dona-tion. The estimate of historical cost for the primary government was based on appraised value as of June 30, 1986, indexed to the date of acquisition.

Assets are depreciated on the straight-line basis over their estimated useful lives. The table below shows the useful life by asset type for the primary government. Infrastructure assets are not being depreciated, as the Commonwealth has elected to use the modified approach, as defined by GASB statement 34. As a result, certain maintenance and preservation costs are expensed when incurred. Additions and improvements to infrastructure assets are capitalized when capacity and efficiency has increased.

The Kentucky Center for the Arts Corporation’s discretely presented component unit financial statements for Fiscal Year 2015, do not contain the Center’s capital assets. The Finance and Administration Cabinet, Division of Statewide Accounting, Financial Reporting Branch adjusted the Commonwealth of Kentucky’s Comprehensive Annual Financial Report to include the capital assets and deprecia-tion of the Center in order to satisfy GAAP requirements.

Useful LifeAsset (Expressed in Years)

Land improvements 10-60Buildings 10-75Machinery and equipment 3-25Infrastructure 20-40Intangibles 2-40


62

M. Governmental Fund Equity

The Commonwealth uses two classifications for governmental fund equity; spendable and nonspendable. The nonspendable classification is further categorized as (a) not in spendable form and (b) legally or contractually required to be maintained intact. The spendable classification is categorized as restricted, committed, assigned and unassigned.

Nonspendable - represents the portion of fund balance that is not in spendable form and therefore cannot be appropriated for future expenditures. Nonspendable includes inventories, prepaid expenses, long term notes and loans receivable and any funds which are legally or contractually required to remain intact.

Spendable categories - The restricted fund category represents re-sources that can be spent only for the specific purposes as established by agreements external to state government; contractual agreements, agreements with creditors and grantors, and laws established by other governments. Laws enacted by the Commonwealth also restrict fund balance when both the revenue source and expenditure restrictions are enacted concurrently or in close proximity. The revenue source must be external to state government and the restriction must be legally enforceable; meaning third parties can compel the Com-monwealth to comply with the restriction.

The committed fund category represents resources which have been designated to be spent only for specific purposes through legislation passed by the General Assembly and approved by the Governor. Commitment of resources is not enforceable by external parties and the commitment can be removed in much the same way as it was originally committed. Committed funds include current legally enforceable restrictions of previously levied revenue sources.

The assigned fund category represents resources that do not meet the criteria for restricted or committed because the legislation which created the revenue source did not restrict the use of funds to the degree necessary. However, in accordance with KRS 42.0201(4) the state controller; the executive director of the Office of Financial Management and the state budget director placed these resources in the special revenue funds with the intent of appropriating at a later date.

Unassigned fund balance is the classification for residual spendable fund balance for the general fund. In all other funds unassigned clas-sification is used to report a deficit balance resulting from overspend-ing for specific purposes for which amounts have been restricted.

The Commonwealth generally segregates restricted, committed, and assigned resources by account (sub-fund) within the governmental funds, other than the general fund. When resources meeting more than one of these spendable classifications are commingled in an account in the state’s accounting system the assumed order of spending is restricted first, committed second, and finally assigned.

The classifications of governmental fund balances are shown in the table on page 64.

The functional categories are responsible for various activities and a brief description of each follows:

General Government - is comprised of one Cabinet and several Departments and Offices that support the various agencies throughout state government including providing central fiscal management, serving the administrative needs of state agencies, operating state tax process, providing technology support and providing a state wide audit function. It also includes numerous Boards and Commissions that certifies, licenses and regulates various professional groups (for example the State Board of Accountancy).

Legislative and Judicial – is comprised of both the Legislative and Judicial Branches of government. The Judicial Branch through its different levels handles all legal disputes affecting the people of the Commonwealth from capital offenses and felonies to land dispute cases to termination of parental rights. The Legislative Branch consists of thirty-eight (38) Senators and one-hundred (100) Representatives. The purpose of the Legislative Branch is to make laws, to determine the duties and services of government, to provide for their execution, and to levy taxes and appropriate funds for the support of government operations.

Commerce – includes the Tourism, Arts and Heritage Cabinet and the Cabinet for Economic Development. The focus is on tourism development and supporting our arts and heritage; in addition to, encouraging job development and retention, and new investment in the state.

Education and Humanities - provides life-long educational services through seamless, efficient and accessible learning opportunities for all Kentucky’s citizens, from pre-school to senior citizens. And as-sists employers in finding qualified applicants for their job openings, assists job seekers to find employment, provides benefits to ease the financial burden on individuals who are unemployed through no fault of their own, provides assessment, guidance, counseling and job placement services to assist eligible Kentuckians with dis-abilities achieve their career goals, offers educational assistance , job training, job placement and assistive technology to Kentuckians with visual disabilities and complies and disseminates a wide range of workforce statistics, including employment, unemployment and wage information.

Human Resources – is responsible for most of Kentucky’s human services and health care programs, including Medicaid, the Depart-ment of Community Based Services and the Department of Public Health. The Cabinet’s services include all Medicaid services, protec-tion for vulnerable children and adults, child abuse investigations, foster care applications, child support collections, cash assistance, food stamps, disability determinations, mental health services, health insurance for children, physical health services and non-emergency transportation.


63

Justice - is responsible for criminal justice services. These encom-pass law enforcement activities and training; prevention, education and treatment of substance abuse; juvenile treatment and detention; adult incarceration; autopsies; death certifications and toxicology analyses; special investigations; paroling of eligible convicted fel-ons; and long range planning and recommendations on statewide criminal justice reform issues.

Natural Resources and Environmental Protection - Resources is responsible for ensuring that natural resources development activi-ties such as agriculture, oil, and gas drilling, and mining are done in an environmental responsible manner, supporting state wide efforts in developing alternate energy resources and carbon sequestration opportunities, ensuring that the natural resources of Kentucky are protected , managed and enhanced to provide maximum benefits to the people and economy of the Commonwealth and coal mining, logging , firefighting and agriculture activities are performed in a safe manner.

Public Protection and Regulation - Protection is responsible for protecting and enhancing Kentucky’s environment. Their functions are to ensure that Kentucky has clean air and safe water, protect human health by enhancing Kentucky’s land resources, ensure environmental compliance by all entities, assist entities in achieving environmental compliance and facilitating environmental stewardship.

Transportation - is responsible for overseeing the development and maintenance of a safe, efficient multi-modal transportation system throughout the Commonwealth. The Cabinet manages more than 27,000 miles of highways, including roughly 20,500 miles of secondary roads, 3,600 miles of primary roads, and more than 1,400 interstate and parkway miles. The Cabinet also provides direction for 230 licensed airports and heliports and oversees all motor ve-hicle and driver’s licensure for more than three million drivers in the Commonwealth.

KRS 45.305 established a budget reserve trust fund account within the general fund. Within thirty days of year end deposits are required to be made at the lesser of : Fifty percent (50%) of the general fund surplus or the amount necessary to make the balance equal to five percent (5%) of the actual general fund receipts collected during the fiscal year just ended. Payments to the account are suspended for the current fiscal year when the account balance is equal to or greater than five percent (5%) of the actual general fund receipts collected during the fiscal year just ended. Money in this account may be appropriated by the General Assembly.


64

Constraints on Fund Balance(Expressed in Thousands)

General Transportation Federal AgencyFund Fund Fund Revenue Fund

Fund Balances: Nonspendable: Inventories $ 6,230 $ 64,190 $ 546 $ 7,235 Cash with fiscal agents Restricted for:

Government administration 98,768 Legislative and Judicial 12,450 Commerce 102,592 Education 47,147 Health and human services 52,245 Environmental and natural resources 21,502 Justice 17,687 Public Protection 63,996 Transportation 479,343 88,272 Debt service

Committed to:Government administration 8,502 Commerce 43 Education 149 Health and human services 7 Environmental and natural resources 1,126 Justice 15 Public Protection 7,479 Transportation 15,572

Assigned to:Government administration 8,828 5,997 Legislative and Judicial 15,694 1,628 Commerce 25 353 Education 1,651 1,798 Health and human services 1,771 Environmental and natural resources 168 Justice 250 Public Protection 674 Transportation 197 25

Unassigned 71,060 (59,950) Total Fund Balances $ 104,359 $ 543,533 $ (59,404) $ 556,777

Major Special Revenue Funds


65

Capital DebtProjects Service

Fund Fund Total

$ $ $ 78,201 18,954 18,954

151,878 250,646 7,291 19,741

68,541 171,133 4,343 51,490

15,978 68,223 15,548 37,050 5,893 23,580 1,529 65,525

31,503 599,118 1,132 1,132

8,502 43

149 7

1,126 15

7,479 15,572

14,825 17,322

378 3,449 1,771

168 250 674 222

11,110 $ 302,504 $ 20,086 $ 1,467,855


66

Long-term obligations generally exclude those amounts reported as expenditures for compensated absences, judgments, contingen-cies, and employer pension contributions in the governmental funds since these amounts would normally be liquidated with expendable available financial resources.

Long-term liabilities of all proprietary and pension trust funds are reported in their individual fund statements. Long-term liabilities of enterprise and internal service funds are also presented in the government-wide Statement of Net Position as a single total in the Business-type Activities and Governmental Activities columns respectively. Fiduciary funds’ long-term liabilities are not displayed on the government-wide Statement of Activities.

P. Conduit Debt

This debt may take the form of certain types of limited-obligation rev-enue bonds, certificates of participation, or similar debt instruments issued to benefit a third party that is not a part of the reporting entity. Although conduit debt obligations bear the Commonwealth’s name as issuer, the Commonwealth has no obligation for such debt beyond the resources provided by a lease or loan with the third party on whose behalf it is issued. GAAP allows the State to refrain from reporting the conduit debt and the related asset. Since the State is not legally, morally, or in any other way responsible for the repayment of conduit debt, these items are not included in the financial statements. The State has $2,271,570,552 of conduit debt, the proceeds of which are used to promote the purposes set forth in KRS 103.200 and 103.210. Q. Future Changes in Accounting Standards

As of June 30, 2015, the Governmental Accounting StandardsBoard (GASB) has issued the following statements not yet imple-mented by the Commonwealth.

GASB Statement No. 72 – Fair Value Measurement and Applica-tion. The requirements of this Statement are effective for financial statements for reporting periods beginning after June 15, 2015.

The requirements of this Statement will enhance comparability of financial statements among governments by requiring measurement of certain assets and liabilities at fair value using a consistent and more detailed definition of fair value and accepted valuation techniques. This Statement also will enhance fair value application guidance and related disclosures in order to provide information to financial statement users about the impact of fair value measurements on a government’s financial position.

GASB Statement No. 75 – Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions. The provisions in Statement 75 are effective for fiscal years beginning after June 15, 2017.

N. Deferred Outflows/Inflows Deferred Outflows/Inflows - GASB 63, 68, and 71 provides finan-cial reporting guidance relative to deferred outflows of resources, a consumption of net assets by the entity that is applicable to a future reporting period, and a deferred inflow of resources, an acquisition of net assets by the entity that is applicable to a future reporting period.

O. Long-Term Obligations

Long-term liabilities that will be financed from governmental funds are presented in the Governmental Activities column of the government-wide Statement of Net Position. This total reported amount of long-term liabilities includes the following:

1. Payments of principal on revenue bonds which are recorded as expenditures in the Debt Service Fund.

2. Compensated absences including accumulated unpaid vaca-tion and compensatory time accruals. The amount accruing to proprietary funds and pension trust funds has been included in the respective funds when material. The policy of the Com-monwealth is to record the cost of annual and compensatory leave. Annual leave is accumulated at amounts ranging from 7.5 to 15.0 hours per month, determined by length of service, with maximum accumulations ranging from 30 to 60 days. The calendar year is the period used for determining accumulated leave. Compensatory leave is granted to authorized employees on an hour-for-hour basis. June 30 estimated liabilities for both annual leave and compensatory leave are summarized in Note 16.

Sick leave for the Primary Government is earned one day per month with unlimited accumulation. All of the qualify-ing retiring employees’ sick leave balances, expressed in months, shall be added to their service credit for the purpose of determining their annual retirement.

There is no liability in the accompanying financial statements for unpaid accumulated sick leave, since it is the Common-wealth’s policy to record the cost of sick leave only when paid. See Note 16 for disclosure of the amount of this contingency. The component units have varying policies for compensated absences. Information regarding these policies is available in the audited financial statement of each component unit.

3. Outstanding capital lease obligations for governmental funds.

4. Judgments and contingent liabilities of governmental funds that will be paid with noncurrent resources.

5. Long-term liabilities of internal service funds.


67

CHANGES IN ACCOUNTING PRINCIPLES, RE-PORTING PRACTICES, AND PRIOR-PERIOD ADJUSTMENTS

The following Accounting Pronouncements were adopted and implemented during the fiscal year, some of which resulted in a restatement of beginning fund balance/net position:

GASB Statement No. 68 – Accounting and Financial Reporting for Pensions - an Amendment of GASB Statement No. 27.

GASB Statement No. 71 – Pension Transition for Contributions Made Subsequent to the Measurement Date – an Amendment of GASB Statement No. 68.

These standards require the recognition of the entire net pension liability, a more comprehensive measure of pension expense and enhanced disclosures relating to the pension.

All applicable provisions of these new statements have been incor-porated into the financial statements and notes.

The requirements of this Statement will enhance accounting and financial reporting for Postemployment Benefits Other Than Pensions that is provided to the employees of state and local governmental employers. This Statement establishes standards for recognizing and measuring liabilities, deferred outflows of resources, deferred inflows of resources, and expense/expenditures. For defined benefit Postemployment Benefits Other Than Pensions, this Statement identifies the methods and assumptions that are required to be used to project benefit payments, discount projected benefit payments to their actuarial present value, and attribute that present value to periods of employee service. Note disclosure and required supplementary information requirements about defined benefit Postemployment Benefits Other Than Pensions will also be addressed.

GASB Statement No. 77 – Tax Abatement Disclosures. The require-ments of this Statement are effective for reporting periods beginning after December 15, 2015.

The requirements of this Statement improve financial reporting by giving users of financial statements essential information that is not consistently or comprehensively reported to the public at present. Disclosure of information about the nature and magnitude of tax abatements will make these transactions more transparent to financial statement users. As a result, users will be better equipped to understand (1) how tax abatements affect a government’s future ability to raise resources and meet its financial obligations and (2) the impact those abatements have on a government’s financial posi-tion and economic condition.

Note 2

The fund balances/net positions as previously reported have been restated or reclassified to conform to generally accepted account-ing principles and to correct balances for erroneously recorded transactions.

Governmental Activities: Governmental Activities restated net position due to the implementation of GASB 68 and 71 and in-cludes a reduction of capital assets of $77,454,000 for items capitalized in error. The effect on net position is a decrease of $24,409,540,000

Business Type Activities: Business Type Activities restated net position due to the implementation of GASB 68 and 71 The effect on net position is a decrease of $218,166,000.

Enterprise Service Funds:

Kentucky State Parks – Kentucky State Parks restated net posi-tion due to the implementation of GASB 68 and 71. The effect on net position is a decrease of $121,906,000.

Kentucky Horse Park – Kentucky Horse Park restated net posi-tion due to the implementation of GASB 68 and 71. The effect on net position is a decrease of $15,834,000.

Insurance Administration – Insurance Administration restated net position due to the implementation of GASB 68 and 71. The effect on net position is a decrease of $69,075,000.

Kentucky Public Employees Health Plan – Kentucky Public Employees Health Plan restated net position due to the implemen-tation of GASB 68 and 71. The effect on net position is a decrease of $11,351,000.

Internal Service Funds:

Fleet Management – Fleet Management restated net position due to the implementation of GASB 68 and 71. The effect on net posi-tion is a decrease of $4,552,000.

Computer Services - Computer Services restated net position due to the implementation of GASB 68 and 71. The effect on net posi-tion is a decrease of $137,703,000.

Prison Industries – Prison Industries restated net position due to the implementation of GASB 68 and 71. The effect on net position is a decrease of $12,645,000.

Central Printing – Central Printing restated net position due to the implementation of GASB 68 and 71. The effect on net position is a decrease of $3,056,000.


68

Kentucky Higher Education Student Loan Corporation - Ken-tucky Higher Education Student Loan Corporation restated net po-sition due to the implementation of GASB 68 and 71. The effect on net position is a decrease of $66,953,000.

Kentucky Public Transportation Infrastructure Authority - Kentucky Public Transportation Infrastructure Authority restated net position due to a reclassification of Construction in Progress and Contributed Capital. The effect on net position is a decrease of $75,710,000.

Component Units – Universities, Colleges, and Related Entities:

Kentucky Community and Technical College System – Ken-tucky Community and Technical College System restated net posi-tion due to a change in accounting policy and the implementation of GASB 68 and 71. The effect on net position is a decrease of $360,581,000.

Eastern Kentucky University – Eastern Kentucky University re-stated net position due to a reclassification of pledges receivable and the implementation of GASB 68 and 71. The effect on net position is a decrease of $378,102,000.

Western Kentucky University – Western Kentucky University restated net position due to an investment and the implementation of GASB 68 and 71. The effect on net position is a decrease of $400,842,000.

Morehead State University – Morehead State University restated net position due to the implementation of GASB 68 and 71. The effect on net position is a decrease of $194,218,000.

Murray State University – Murray State University restated net position due to the implementation of GASB 68 and 71. The effect on net position is a decrease of $230,675,000.

Northern Kentucky University – Northern Kentucky University restated net position due to the implementation of GASB 68 and 71. The effect on net position is a decrease of $210,436,000.

Kentucky State University – Kentucky State University restated net position due to the implementation of GASB 68 and 71. The effect on net position is a decrease of $93,363,000.

Kentucky Council on Postsecondary Education – Kentucky Council on Postsecondary Education restated net position due to the implementation of GASB 68 and 71. The effect on net position is a decrease of $17,684,000.

Restatement of all Component Units - results in an overall de-crease in net position of $2,216,385,000.

Property Management – Property Management restated net posi-tion due to the implementation of GASB 68 and 71. The effect on net position is a decrease of $40,095,000.

Risk Management – Risk Management restated net position due to the implementation of GASB 68 and 71. The effect on net posi-tion is a decrease of $5,252,000.

Component Units – Authorities:

Kentucky River Authority – Kentucky River Authority restated net position due to the implementation of GASB 68 and 71. The effect on net position is a decrease of $2,263,000.

Kentucky Higher Education Assistance Authority – Kentucky Higher Education Assistance Authority restated net position due to a reclassification of an account receivable and the implementation of GASB 68 and 71. The effect on net position is a decrease of $24,640,000.

Bluegrass State Skills Corporation – Bluegrass State Skills Cor-poration restated net position due to the implementation of GASB 68 and 71. The effect on net position is a decrease of $406,000.

Kentucky State Fair Board – Kentucky State Fair Board restated net position due to a reclassification of an accounts receivable and the implementation of GASB 68 and 71. The effect on net position is a decrease of $46,328,000.

Kentucky Authority for Educational Television – Kentucky Au-thority for Educational Television restated net position due to the implementation of GASB 68 and 71. The effect on net position is a decrease of $36,100,000.

Kentucky Economic Development Finance Authority – Ken-tucky Economic Development Finance Authority restated net po-sition due to the implementation of GASB 68 and 71. The effect on net position is a decrease of $4,495,000.

Kentucky Artisan Center – Kentucky Artisan Center restated net position due to the implementation of GASB 68 and 71. The effect on net position is a decrease of $3,005,000.

Kentucky Infrastructure Authority – Kentucky Infrastructure Authority restated net position due to the implementation of GASB 68 and 71. The effect on net position is a decrease of $3,949,000.

Kentucky Agricultural Finance Corporation – Kentucky Agri-cultural Finance Corporation restated net position due to the im-plementation of GASB 68 and 71. The effect on net position is a decrease of $540,000.

Kentucky Housing Corporation - Kentucky Housing Corpora-tion restated net position due to the implementation of GASB 68 and 71. The effect on net position is a decrease of $66,095,000.


69

Note 3

STEWARDSHIP, COMPLIANCE, AND ACCOUNTABILITY A. Governmental Activities – The governmental activities has a net position deficit of $14,141,511,000. The deficit is a result of the recognition of the net pension liability, in accordance with GASB 68 and 71.

B. Federal Fund – The Federal Fund has a net position deficit of $59,404,000. The deficit is a result of expenditure accruals, which will be funded in future periods.

C. Enterprise Funds – The Insurance Administration Fund has a net position deficit of $618,738,000. The deficit is a result of ac-cumulated claims liability estimated by actuarial methods for the risk pools, which will be funded in future periods.

D. Internal Service Funds – The Risk Management Fund has a net position deficit of $207,439,000. The deficit is the result of ac-cumulated claims liabilities of the Commonwealth’s self-insured workers’ compensation programs, and is to be funded in future periods. The Central Printing Fund has a net position deficit of $3,740,000. The deficit is the result of competitive pressure from other state agencies and outside printing sources. Central Print-ing is unable to develop billing rates that would cover their costs resulting in a negative fund balance. The Computer Services Fund has a net position deficit of $120,595,000. This deficit is a result of the recognition of the net pension liability, in accordance with GASB 68 and 71. The Prison Industries Fund has a net position deficit of $3,796,000. This deficit is a result of the recognition of the net pension liability, in accordance with GASB 68 and 71.

E. Component Units – Authorities – The Bluegrass State Skills Corporation has a net position deficit of $409,000. This deficit is a result of the recognition of the net pension liability, in accordance with GASB 68 and 71. The Kentucky Authority for Educational Television has a net position deficit of $11,690,000. This deficit is a result of the recognition of the net pension liability, in accordance with GASB 68 and 71. The Kentucky Council on Postsecondary Education has a net position deficit of $8,754,000. This deficit is a result of the recognition of the Net Pension Liability net pension liability, in accordance with GASB 68 and 71. Eastern Kentucky University has a net deficit of $4,977,000. This deficit is a result of the recognition of the net pension liability, in accordance with GASB 68 and 71.


70

Note 4

DISAGGREGATION OF ACCOUNTS PAYABLE AND ACCOUNTS RECEIVABLE

Accounts payable for the Commonwealth of Kentucky are amounts owed by the State as of June 30, 2015. Those liabilities that must be paid within one year are considered current. Amounts due after one year are deemed noncurrent accounts payable. Accounts receivable are amounts owed to the State. Similar to accounts payable, any amounts to be received within one year are classified as current. All other receivables are noncurrent. For Governmental Activities and Business-Type Activities, the line indicating “Accounts Payable” and “Net Receivables” are described below.

Amounts reported as “Taxes Receivable” are significant to the State. Taxes receivable report those tax amounts owed to the Commonwealth of Kentucky that remain uncollected as of June 30, 2015. All receivables are reported net of an Allowance for Uncollectibles to reflect the true value of receivables. Fines, forfeitures, and license fees are recognized as revenue when received and, therefore, do not require the recognition of accounts receivable. The “Current Taxes Receivable” for Governmental Activities and Business-Type Activities are described below.

Disaggregation of Payables and Receivables(Expressed in Thousands)

Current PayablesPersonal services $ 164,377 $ 786 $ 5,529 $ 170,692 $ 5,311 $ 176,003 Utilities, rental and

other services 14,087 332 2,217 16,636 1,737 18,373 Commodities and supplies 9,321 162 1,969 11,452 1,631 13,083 Claims (2,472) 3,046 574 21,654 22,228 Grants and subsidies 1,316,371 13,673 32 1,330,076 32,154 1,362,230 Capital outlay 73,647 2 215 73,864 285 74,149 Travel 1,997 13 9 2,019 34 2,053 Judgements 1,629 1,629 3 1,632 Interest Payable 112,891 7 41 112,939 45 112,984 Other 120,818 18 1,660 122,496 (150) 122,346

Total Current Payables $ 1,812,666 $ 14,993 $ 14,718 $ 1,842,377 $ 62,704 $ 1,905,081

Current ReceivablesCharges for services $ 73,180 $ 139,647 $ 766 $ 213,593 $ 18,990 $ 232,583 Taxes receivable 1,882,733 99,067 1,981,800 226 1,982,026 Investment receivable 1,827 830 2,657 36 2,693 Intergovernmental revenue 1,082,341 24 1,082,365 5,309 1,087,674 Other 70,137 61,614 351 132,102 295,753 427,855 Allowances for uncollectables (910,732) (110,433) (1,021,165) (15,567) (1,036,732)

Total Current Receivables $ 2,199,486 $ 190,749 $ 1,117 $ 2,391,352 $ 304,747 $ 2,696,099

Total Primary Government Funds

Activities

Business-Type

Major Total

Governmental ActivitiesFunds Funds Service Funds

Governmental ActivitiesInternal Non-majorMajor

Under the modified accrual basis of accounting, as used in the fund statements, amounts outstanding but owed at the end of the year may be recorded in one of two ways. If the receivable is measurable and expected to be collected within 30 days, revenue is recognized. However, if the receivable is not expected to be collected within 30 days, it is not considered to be available to liquidate the liabilities of the current period and will be reported as deferred inflows of resources.


71

The State Property and Buildings Commission has issued revenue bonds and the Kentucky Asset Liability Commission has issued notes and entered into lease agreements to finance capital projects for the University of Kentucky, Kentucky State Fair Board, Kentucky Higher Education Assistance Authority, Kentucky River Authority, and Eastern Kentucky University. The bond issues are shown as liabilities of the State Property and Buildings Commission in the

entity wide financial statements. A capital lease liability is reflected in the financial statements of the various discretely presented component units, for which the debt was issued and a corresponding capital lease receivable has been recorded in the financial statements of the Commonwealth to accurately reflect the transaction. Amounts due under these lease agreements are reflected in the following table.

Taxes Receivable(Expressed in Thousands) Total Primary

Governmental Activities GovernmentMajor Funds Non-Major Funds

Current Taxes ReceivableSales and gross receipts $ 890,760 $ 7,134 $ 897,894 Individual income 717,984 717,984 Corporate 95,220 11 95,231 Property 119,870 119,870 License and privilege 1,165 6,244 7,409 Coal severance 36,234 4,430 40,664 Inheritance and estate 8,913 3,085 11,998 Miscellaneous 12,587 78,163 90,750

Total Current Taxes Receivable $ 1,882,733 $ 99,067 $ 1,981,800

Future debt service payments for leases receivable as ofJune 30, 2015, are as follows (Expressed in Thousands):

2016 $ 25,140 $ 6,380 $ 31,5202017 20,390 5,372 25,7622018 21,335 4,421 25,7562019 16,000 3,564 19,5642020 13,395 2,919 16,3142021-2025 38,330 6,995 45,3252026-2030 8,095 2,810 10,9052031-2035 6,625 639 7,264Total leases receivable $ 149,310 $ 33,100 $ 182,410

Principal Interest Total


72

Note 5

EQUITY IN POOLED CASH AND INVESTMENTS, CASH, AND INVESTMENTS

The Commonwealth maintains an internal cash and investment pool that is available for use by all funds under the auspices of the State Investment Commission as authorized under KRS 42.500 et al. In ad-dition, investments are separately held by several of the State’s funds and component units. Legally authorized investments vary by fund but generally include: obligations of or guaranteed by the United States; obligations of any corporation of the United States Government; as-set backed securities; U.S. dollar denominated corporate securities; collateralized certificates of deposit; bankers’ acceptances; commer-cial paper; and repurchase agreements. In addition to these, pension plans and certain Component Units are permitted to purchase common stocks, corporate bonds and real property and mineral rights. The Com-monwealth is also eligible to invest in reverse repurchase agreements.

PRIMARY GOVERNMENT

Custodial Credit Risk-Deposits – The custodial credit risk for depos-its is the risk that in the event of a bank failure, the State’s deposits may not be recovered. At year end, the carrying amount of the Com-monwealth’s deposits for the Primary Government, excluding pension and (OPEB) trust funds, was $1,141,333,000 and the bank balance was $1,141,333,000. The bank balance of the Primary Government ad-ministered by the State Treasurer was covered by Federal depository insurance or by collateral held by the Commonwealth or the Common-wealth’s agent in the Commonwealth’s name.

Custodial Credit Risk-Investments - Custodial credit risk for invest-ments is the risk that, in the event of a failure of the counterparty, the Commonwealth will not be able to recover the value of the investment or collateral securities that are in the possession of an outside party. The Commonwealth holds investments both for its own benefit and as an agent for other related parties. The major investment programs con-ducted for the direct benefit of the Commonwealth are administered by the Office of Financial Management. The investments held in the Commonwealth’s investment pool are insured or registered, or held by the Commonwealth of Kentucky or its agent in the Commonwealth’s name.

The credit risk mix of the retirement systems, and other component units, is disclosed in the financial statement footnotes of those indi-vidual entities.

Statutes require that securities underlying repurchase agreements must have a fair value of at least 102 percent of the cost of the repurchase agreement. The fair value of securities underlying repurchase agree-ments fell below this required level on a few occasions during the year; however, no losses were sustained due to the fall in collateralization

levels. The collateralization is monitored on a weekly basis (as speci-fied within 200 KAR 14.081) and at any point where the collateraliza-tion falls below 102 percent of the cost of the repurchase agreement, the seller/borrower is contacted and the situation is normally rectified within two business days.

Securities Lending Program – State statutes authorize the Com-monwealth to enter into securities lending agreements. The Com-monwealth has entered into an agent agreement. The agent lends the Commonwealth’s US Treasuries, agencies and corporate bonds in ex-change for cash. The cash is invested in short-term securities. After re-bate and expenses the Commonwealth receives 85 percent of the profit earned. The securities transferred are a part of the total investments reported above. Cash received as collateral on securities lending trans-actions and investments made with that cash are reported as assets. The Commonwealth retains the interest income on the securities being transferred. During the year, the Commonwealth earned $3,322,912 in securities lending income. On June 30, 2015, the fair value of the securities transferred was $1,378,283,303 and the fair value of the se-curities purchased by the Commonwealth was $1,381,109,208. The collateralization requirements and monitoring procedures in the secu-rities lending program are similar to those requirements in regard to repurchase agreements. The Commonwealth requires 100% collater-alization on all repurchase agreements. The agent also indemnifies the Commonwealth from any losses from borrowers. The Commonwealth lends its securities generally on an overnight basis.

Options - The Commonwealth’s investment strategy includes the use of derivatives as a tool in managing market risk and providing an op-portunity for enhanced return. The Commonwealth selectively utilizes put and call options on United States Treasury securities. These op-tions are on a covered basis, where the Commonwealth holds either cash or securities sufficient to meet the obligation, should the option be exercised. On June 30, 2015, the portfolio had no obligations under option. The Commonwealth also purchases securities that have built in covered calls (callable agency securities). The risk in holding these securities is the risk that the security can be called (bought back) by the issuing agency at par either on or after a specific date.


73

Interest Rate Risk

Interest rate risk is the risk that changes in interest rates of debt investments will adversely affect the fair value of an investment. The Commonwealth has regulatory limits on investment maturi-ties as a means of managing its exposure to fair value losses aris-ing from rising interest rates. It also has limits on portfolio dura-tions for the same purpose.

The primary government’s investments (excluding the pension and (OPEB) trust funds) at June 30, 2015, are presented below. All investments are presented by investment type.

Cash And Investments By TypePrimary Government(Expressed in Thousands)I. Cash:

Cash $ 1,059,067 $ 1,059,067 Cash with Fiscal Agents 82,266 82,266 Total Cash $ 1,141,333 $ 1,141,333

II. Investments:Investments Managed Based Upon Duration

Debt SecuritiesCash Equivalents $ 872,595 0.078 Fixed Income Mutual Funds 243,614 0.003U.S. Government & Agency Obligations 705,818 0.880 Mortgage-Backed Securities 215,654 1.486 Corporate Obligations 129,796 1.826 Asset Backed Securities 77,110 0.924 Municipal Obligations 18,439 1.181

Total Debt Securities 2,263,026 Portfolio Effective Weighted Duration

Other InvestmentsFixed Income Mutual Funds 11,282 Common Stock 1,698 Securities Lending Invest 1,381,110

Total Other Investments 1,394,090

Total Investments $ 3,657,116

0.592

Carrying Amount Bank Balance

Fair Value Effective


74

Credit Risk of Debt Securities

Credit risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. The Commonwealth is statutorily limited as to credit ratings, at the time of purchase. Com-mercial paper must be rated in the highest category by a nationally recognized rating agency. United States denominated corporate, Yankee, and Eurodollar securities must be rated in one of the three highest categories by a nationally recognized rating agency. Asset-backed securities must be rated in the highest category by a nation-ally recognized rating agency. Certificates of Deposit and Bankers acceptances must be rated in one of the three highest categories by a nationally recognized rating agency. By regulation all mortgage pass-through securities and collateralized mortgage obligations must be issued by U.S. government agencies or by government sponsored entities.

The primary government’s, excluding the pension and (OPEB) trust funds, rated debt investments as of June 30, 2015, and the ratings are presented in the following table.

Concentration of Credit Risk

Concentration of credit risk is the risk of loss attributed to the mag-nitude of a government’s investment in a single issuer. Regula-tion limits the amount owned of any given issuer of corporate and commercial paper to $25,000,000. At June 30, 2015, the primary government had no investments which would constitute a concen-tration of credit risk.

Investments and Credit Ratings Primary Government (Expressed in Thousands)

AAA/Aaa AA/Aa A Unrated NACash Equivalents $ 18,674 $ 378,776 $ 89,676 $ 385,469 $ $ 872,595 Fixed Income Mutual Funds 243,614 11,282 254,896 U.S. Government & Agency Obligations 26,694 679,124 705,818 Mortgage-Backed Securities 215,654 215,654 Corporate Obligations 10,665 36,449 82,682 129,796 Common Stock 1,698 1,698 Asset Backed Securities 77,110 77,110 Municipal Obligations 4,548 11,889 2,002 18,439 Securities Lending 1,381,110 1,381,110

Total Investments $ 596,959 $ 1,106,238 $ 174,360 $ 385,469 $ 1,394,090 $ 3,657,116

of Investments

Standard & Poor's/Moody's Credit RatingsTotal Fair Value


75

PENSION AND (OPEB) TRUST FUNDS

Custodial Credit Risk-Deposits and Investments.

The custodial credit risk for deposits is the risk that in the event of a bank failure, the State’s deposits may not be recovered. At year end, the carrying amount of the deposits for the Pension and (OPEB) trust funds was $283,768,000 and the bank balance was $283,768,000.

Custodial credit risk for investments is the risk that, in the event of a failure of the counterparty, the Commonwealth will not be able to recover the value of the investment or collateral securities that are in the possession of an outside party. Of the Pension and (OPEB) Trust Funds, only Kentucky Retirement Systems has investments subject to custodial credit risk. The investments are listed as for-eign currency in the amount of $10,387,000 which are uninsured and not registered in the name of the Commonwealth but are held by the counterparty.

Foreign Currency Risk

Foreign currency risk is the risk that changes in exchange rates will adversely affect the fair value of an investment or deposit. The Commonwealth’s policy historically has been to invest only in securities in U.S. denominations.


76

Interest Rate Risk

Interest rate risk is the risk that changes in interest rates of debt investments will adversely affect the fair value of an investment. Kentucky Revised Statutes (KRS 61.650) grants the responsibility for the investment of plan net position to the Board of Trustees of the Retirement Systems. Each System has very specific policies regarding their investment activity. A detailed discussion of those policies can be found in the notes to the audited financial statements of the various Pension and (OPEB) Trust Funds.

The Pension and (OPEB) Trust Funds investments at June 30, 2015, are presented below. All investments are presented by investment type.

Cash and Investments by TypePension and (OPEB) Trust Funds(Expressed in Thousands)I. Cash

Cash $ 273,138 $ 273,138 Money Market 10,630 10,630

Total Cash $ 283,768 $ 283,768

II. Investments:Investments Managed Based On Maturities

Debt SecuritiesU.S. Government & Agency Obligations $ 29,223 $ 3,669 $ 20,369 $ 5,185 Corporate Obligations 72,561 4,983 39,900 27,678 Municipal Obligations 4,065 510 2,834 721

Total Debt Securities 105,849 $ 9,162 $ 63,103 $ 33,584

Investments Managed Based Upon DurationDebt Securities Fair Value Effective Modified MacaulayCash Equivalents 650,188 0.010 Cash Equivalents 456,916 5.374 Fixed Income Mutual Funds 444,963 0.049 U.S. Government & Agency Obligations 853,330 7.161 U.S. Government & Agency Obligations 1,483,227 4.318 Mortgage-Backed Securities 234,416 17.315 Mortgage-Backed Securities 74,990 2.467 Corporate Obligations 2,361,010 7.015 Corporate Obligations 944,167 6.273 Asset Backed Securities 82,127 11.014 Asset Backed Securities 126,693 5.757 Municipal Obligations 486,444 12.841 Municipal Obligations 36,304 7.328 Guaranteed Investment Contract\Annuities 679,266 3.260 Other 471,658 0.078 Other 528,262 8.109

Total Debt Securities 9,913,961 Portfolio Weighted Effective Duration 7.260 Portfolio Weighted Modified Duration 3.967 Portfolio Weighted Macaulay Duration 5.381

Other InvestmentsCommon Stock 20,095,920 Pooled Investments 11,359 Limited Partnerships 3,380,139 Real Estate 1,682,717 Securities Lending 1,476,630 Other Investments 1,939,865

Total Other Investments 28,586,630


6-15 Years


Fair Value < 1 year 1-5 Years


77


Credit risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. Each Pension and (OPEB) Trust Fund has an investment policy that defines the types of investments and ratings available to them. Specific policies can be found in the notes to the audited financial statements of the individual component unit.

The Pension and (OPEB) Trust Funds, rated debt investments as of June 30, 2015, and the ratings are presented in the following table.


Concentration of credit risk is the risk of loss attributed to the magnitude of a government’s investment in a single issuer. With the exception of the Kentucky Public Employees’ Deferred Compensation Author-ity’s (KPEDCA) there is a policy limiting the amount of investment in a single issuer to 5% or less of the investment portfolios fair value. The following KPEDCA Fund investment contracts represent 5% or more of investments held in trust for Plan benefits at June 30, 2015. Asset Description Amount Fixed Contract Fund $679,266,000T Rowe Price Mid Cap Growth 327,596,000Fidelity Contrafund 256,496,000Vanguard Wellington 257,486,000Fidelity Growth Co 213,080,000Vanguard Institutional Index Fund 144,361,000

Investments and Credit RatingsPension and (OPEB) Trust Funds(Expressed in Thousands)

Quality RatingAAA $ 411,845 AA+ 260,703 AA 1,564,801 AA- 60,808 A+ 45,793 A 756,712 A- 92,338 BBB+ 98,181 BBB 703,012 BBB- 159,827 BB+ 181,985 BB 432,503 BB- 127,119 B+ 178,210 B 517,854 B- 107,350 CCC+ 55,944 CCC 30,009 CCC- 3,373 CC 3,132 D 4,636 Not Rated 2,747,613 Total Credit Risk Debt Securities 8,543,748

Cash Equivalents 650,188 U.S. Government & Agencies 829,261 Common Stock 20,095,920 Pooled Investments 11,359 Limited Partnerships 3,380,139 Real Estate 1,682,717 Securities Lending 1,476,630 Other 1,936,478


Amount


78


Foreign currency risk is the risk that changes in exchange rates will adversely affect the fair value of an investment or deposit.

With the exception of the KPEDCA fixed contract fund the Pension and (OPEB) Trust Funds do not have a formal policy that addresses investments in foreign currency. Additional disclosures regarding

the Pension and (OPEB) Trust Funds exposure to foreign currency risk can be found in the notes to the audited financial statements of the individual pension and (OPEB) trust funds.

The Pension and (OPEB) Trust Funds, investments in foreign cur-rency as of June 30, 2015, are presented in the following table.

Foreign Currency RiskPension and (OPEB) Trust Funds (Expressed in Thousands)

Foreign CurrencyAustralian Dollar $ 100 $ 146,629 $ 49,552 $ $ 196,281 Bermudian Dollar 102,755 3,445 106,200 Brazilian Real 63,052 2,020 65,072 British Pound Sterling 1,031 888,162 50,493 939,686 Canadian Dollar 236 293,734 136,815 430,785 Cayman Islands Dollar 74,601 8,990 83,591 Chilean Peso 7,482 7,482 Chinese Yuan 184,342 184,342 Columbian Peso 721 721 Czech Crown 303 303 Danish Krone 103,980 834 104,814 Dominican Peso 155 155 Egyptian Pound 2,140 2,140 Euro 264 1,740,174 135,475 1,875,913 German Mark 209 209 Hong Kong Dollar 52 201,937 201,989 Hungarian Forint 3,013 3,013 Indian Rupee 99,893 611 100,504 Indonesian Rupiah 33,727 584 34,311 Israeli New Shekel 45,558 10 45,568 Japenese Yen 136 740,320 11,430 751,886 Jersey Pound 89,974 5,465 95,439 Jordanian Dinar 6,039 6,039 Liberian Dollar 1,876 1,424 3,300 Malaysian Ringgit 4,532 380 4,912 Mexican Peso 136 60,335 11,570 72,041 Moroccan Dirham 2,961 2,961 Netherlands Antillean Guilder 52,125 52,125 New Taiwan dollar 2,324 2,324 New Zealand Dollar 7 12,162 299 12,468 Norwegian Krone 10 46,447 8,709 55,166 Panamanian Balboa 14,765 14,765 Peruvian Nuevo Sol 5,961 5,961 Philippine Peso 17,207 17,207 Polish Zloty 3,615 647 4,262 Riyal 1,218 1,218 Russian Ruble 27,898 (12) 27,886 Singapore Dollar 1 64,274 64,275 South African Rand 19 39,292 229 39,540 South Korean Won 75,451 7,901 83,352 Swedish Krona 32 154,213 23,119 177,364 Swiss Franc 287,808 12,764 300,572 Taiwan Dollar 77,612 77,612 Thai Bhat 25,767 25,767 Turkish Lira 19,447 2,183 21,630 UAE Dirham 10,250 10,250 Various 12,177 656 12,833

American Funds Euro Pacific Growth Fund 83,007 83,007 Dodge & Cox International Stock Fund 27,677 27,677 DFA International Small Cap 19,275 19,275 Vanguard Total International Stock Fund 3,512 3,512

Total Securities Subject To Foreign Currency Risk 2,024 5,972,933 484,748 6,459,705 USD (Securities Held By Intl Investment Mgrs) 14,194,998 14,194,998 Total International Investment Securities $ 2,024 $ 5,972,933 $ 484,748 $ 14,194,998 $ 20,654,703

Short Term Total Equity Debt None Designated


79

Securities Lending Program

Kentucky Revised Statutes permit the retirement systems to lend their securities to broker-dealers and other entities. The borrowers of the securities agree to transfer to the retirement system’s custodial bank(s) either cash collateral or other securities with a fair value of 102 percent of the value of the borrowed securities. The borrowers of the securities simultaneously agree to return the borrowed securi-ties in exchange for the collateral at a later date. At June 30, 2015, the retirement systems have no credit risk exposure to borrowers because the amounts the retirement systems owe the borrowers exceed the amounts the borrowers owe the retirement systems. The retirement systems cannot pledge or sell collateral securities unless the borrower defaults. More detail of individual policies may be found in the audited financial statements of each retirement system.

Derivatives

Derivative instruments are financial contracts whose values depend on the values of one or more underlying assets, reference rates, or financial indices. The Kentucky Retirement Systems was the only Pension and (OPEB) Trust Fund to have investment derivatives at June 30, 2015. More detail on those individual investment deriva-tives may be found in the audited financial statements of Kentucky Retirement Systems.


80

MAJOR DISCRETELY PRESENTED COMPONENT UNITS

Custodial Credit Risk-Deposits and Investments

The custodial credit risk for deposits is the risk that in the event of a bank failure, the State’s deposits may not be recovered. At year end, the carrying amount of the major discretely presented component units’ deposits was $1,621,050,000 and bank balance was $1,574,579,000.

Custodial credit risk for investments is the risk that, in the event of a failure of the counterparty, the component unit will not be able to recover the value of the investment or collateral securities that are in the possession of an outside party. Each component unit has informal policies to control custodial credit risk and those policies can be found in the notes to the audited financial statements of the individual component unit.

The following table summarizes the custodial credit risk main-tained for investments held by the major discretely presented com-ponent units for the fiscal year ended June 30, 2015.

Custodial RiskDiscretely Presented Major Component Units(Expressed in Thousands)I. DepositsCash And Equivalents (original maturity 90 days or less):Deposits are uninsured anda) uncollateralized; $ 4,963

b) collateralized with securities held by the pledging financial institution; or 26,680

Total Deposits Subject To Custodial Credit Risk $ 31,643

II. Non-Current Cash And Investments:

Non-current cash and investments which are uninsured, are not registered in the name of the Commonwealth, and are held by either (a) the counterparty or $ 1,519,269

(b) the counterparty's trust department or agent but not in the Commonwealth's name. 184,322

Total Non-Current Cash And Investments Subject To Custodial Credit Risk $ 1,703,591

Investment Types:

Debt SecuritiesType B

(trust or agent)Cash Equivalents $ $ 61,485Fixed Income Mutual Funds 735,968 21,059U.S. Government & Agency Obligations 10,108 2,589Mortgage Backed SecuritiesCorporate Obligations 2,859Municipal Obligations 12,487

Total Debt Securities 761,422 85,133

Other InvestmentsCash Equivalents 499 386Fixed Income Mutual Funds 80,615Common Stock 38,837 44,057Alternatives 472,893Real Estate 1,178 287Funds Held In Trust By Others 51,945Other Various 163,825 2,514

Total Other Investments 757,847 99,189

Total Type A 1,519,269 Total Type B 184,322

Total Non-Current Cash And Investments Subject To Custodial Credit Risk $ 1,703,591

Type A (counterparty)


81

Interest Rate Risk

Interest rate risk is the risk that changes in interest rates of debt in-vestments will adversely affect the fair value of an investment. The component units have numerous policies that limit the amounts and types of investments as a means of managing the exposure to fair value losses arising from increasing interest rates. Specific policies can be found in the notes to the audited financial statements of the individual component unit.

The following table summarizes the investments held by the major discretely presented component units for the fiscal year ended June 30, 2015.

Cash And Investments By TypeDiscretely Presented Major Component Units(Expressed in Thousands)I. Cash

Cash $ 595,750 $ 549,279 Money Market 267,291 267,291 Other 758,009 758,009

Total Cash $ 1,621,050 $ 1,574,579

II. Investments:Investments Managed Based On Maturities

Debt SecuritiesCash Equivalents $ 68,861 $ 62,041 $ 1,127 $ 978 $ 4,715U.S. Government & Agency Obligations 229,509 53,389 162,282 13,331 507Corporate Obligations 52,767 2,410 38,527 7,009 4,821Guaranteed Investment Contract/Annuities 3,786 56 159 3,571

Total Debt Securities 354,923 $ 117,840 $ 201,992 $ 21,477 $ 13,614

Investments Managed Based Upon DurationDebt SecuritiesCash Equivalents 70,467Fixed Income Mutual Funds 21,059 4.800 Fixed Income Mutual Funds 216,841 0.340 U.S. Government & Agency Obligations 151,064 4.425 U.S. Government & Agency Obligations 11,503 2.577 Mortgage Backed Securities 363,215 2.420 Corporate Debt 4,211 2.480 Corporate Debt 8,050 0.660

Total Debt Securities 846,410Portfolio Effective Weighted Duration 2.720 Portfolio Modified Weighted Duration 0.460

Other InvestmentsFixed Income Mutual Funds 77,691Common Stock 624,155Corporate Bonds 2,859Mortgage Loans 287Alternatives 1,096,815Real Estate 106,886Funds Held In Trust By Others 51,945Other 110,039Total Other Investments 2,070,677


> 10 Years

Fair Value Effective Modified


Fair Value < 1 year 1-5 Years 6-10 Years


82


Credit risk is the risk that an issuer or other counterparty to an in-vestment will not fulfill its obligations. Each component unit has an investment policy that defines the types of investments and ratings available to them. Specific policies can be found in the notes to the audited financial statements of the individual component unit.

The major discretely presented component units, investments as of June 30, 2015, and the ratings are presented in the following table.

Investments and Credit RatingsDiscretely Presented Major Component Units(Expressed in Thousands)

BB/Ba or Lower UnratedCash Equivalents $ $ $ $ $ $ 138,841 $ 487 $ 139,328Fixed Income Mutual Funds 21,059 80,615 215,666 317,340U.S. Government &

Agency Obligations 255,757 187,005 195 863 25,184 9,046 478,050 Mortgage Backed Securities 363,215 363,215

Corporate Obligations 9,611 5,243 19,569 23,335 8,054 3,250 69,062Common Stock 82,894 541,262 624,156Municipal Obligations 1,834 11,133 12,967Guaranteed Investment

Contracts/Annuities 159 3,627 3,786Alternatives 611,542 485,274 1,096,816Real Estate 1,178 105,708 106,886Funds Held In Trust

By Others 51,945 51,945Other 8,313 146 8,459

Total Investments $ 630,417 $ 203,540 $ 40,628 $ 23,530 $ 8,917 $ 1,003,762 $ 1,361,216 $ 3,272,010

Standard & Poor's/Moody's Credit Ratings

NATotal Fair Valueof InvestmentsAAA/Aaa AA/Aa A BBB/Baa


83


Concentration of credit risk is the risk of loss attributed to the mag-nitude of the government’s investment in a single issuer. All of the major discretely presented component units except the Kentucky Housing Corporation (KHC) has policies in place that limit the amount that can be invested in a single issuer to 5% of the total portfolio market value. KHC places no limit on the amount they may invest in any one issuer. More than five percent of the KHC’s investments are in Fannie Mae, GNMA, U.S. Treasury and Dreyfus. These investments are 16%, 46%, 23% and 12%, respectively, of the KHC’s total investments.


Foreign currency risk is the risk that changes in exchange rates will adversely affect the fair value of an investment or deposit. Policies for controlling foreign currency risk will vary with each component unit, individual policies can be found in the notes to the financial statements of the respective component unit.

Of the major discretely presented component units only the Uni-versity of Kentucky has foreign currency risk as of June 30, 2015. The university has $6,971,000 in a pooled private equity fund, $5,174,000 in a pooled real estate fund, $38,289,000 in common stock and $720,000 in cash equivalents.


84

Note 6

CAPITAL ASSETS

Capital asset activity for the year ended June 30, 2015(Expressed in Thousands):

Beginning EndingBalance Restated Additions Decreases Balance

Governmental ActivitiesCapital assets, not being depreciated:

Land 216,387$ 3,938$ (824)$ 219,501$ Construction in progress 1,770,030 619,545 (477,704) 1,911,871Infrastructure 19,880,500 463,903 (113,613) 20,230,790Easements and Other Intangibles 132,999 2,038 135,037

Total capital assets not being depreciated 21,999,916 1,089,424 (592,141) 22,497,199

Capital assets, being depreciated/amortized:Improvements other than buildings 21,395 4,550 25,945Buildings 1,387,996 24,635 (12,944) 1,399,687Machinery and Equipment 644,285 62,133 (63,097) 643,321Easements and Other Intangibles 44,576 44,576

Total capital assets, being depreciated/amortized 2,098,252 91,318 (76,041) 2,113,529

Less accumulated depreciation/amortization:Improvements other than buildings (9,789) (814) (10,603)Buildings (589,854) (32,875) 10,196 (612,533)Machinery and Equipment (423,200) (57,694) 51,631 (429,263)Easements and Other Intangibles (17,009) (4,032) (21,041)

Total accumulated depreciation (1,039,852) (95,415) 61,827 (1,073,440)Total capital assets, being depreciated/amortized, net 1,058,400 (4,097) (14,214) 1,040,089

Governmental activities capital assets, net 23,058,316$ 1,085,327$ (606,355)$ 23,537,288$

Business-type activitiesCapital assets, not being depreciated:

Land 21,583$ 240$ $ 21,823$ Construction in progress 23,720 2,245 (89) 25,876

Total capital assets, not being depreciated 45,303 2,485 (89) 47,699

Capital assets, being depreciated/amortized: Improvements other than buildings 144,933 144,933Buildings 339,873 89 339,962Machinery and Equipment 21,094 1,352 (647) 21,799Easements and Other Intangibles 2,322 2,322

Total capital assets, being depreciated/amortized 508,222 1,441 (647) 509,016

Less accumulated depreciation for:Improvements other than buildings (71,145) (4,082) (75,227)Buildings (139,686) (10,964) (150,650)Machinery and Equipment (13,041) (957) 565 (13,433)Easements and Other Intangibles (1,455) (116) (1,571)

Total accumulated depreciation (225,327) (16,119) 565 (240,881)

Total capital assets, being depreciated/amortized, net 282,895 (14,678) (82) 268,135

Business-type activities capital assets, net 328,198$ (12,193)$ (171)$ 315,834$

Primary Government:

Primary Government


85

Depreciation expense, charged to functions/programsof the primary government as follows:(Expressed in Thousands)

General Government $ 12,111 $Legislative and Judicial 1,253Commerce 2,179Education and Humanities 2,159Human Resources 3,780Justice 20,395Natural Resources and Environmental Protection 1,758Public Protection and Regulation 257Transportation 24,855Capital assets held by government's internal service

funds are charged to the various functions based on usage of the assets 26,668

State Parks 11,835Horse Park 4,081Insurance Administration 203

Total depreciation expense by activities $ 95,415 $ 16,119

Discretely presented major component unitsCapital asset activity for the year ended June 30, 2015(Expressed in Thousands):

Component UnitsBeginning Ending

Balance Restated Additions Retirements BalanceCapital assets, not being depreciated:

Land 199,019$ 2,806$ (3,935)$ 197,890$ Construction in progress 758,134 558,750 (129,789) 1,187,095

Totals, capital assets not being depreciated 957,153 561,556 (133,724) 1,384,985

Capital assets, being depreciated/amortized:Improvements other than buildings 242,161 23,041 (313) 264,889Buildings 4,219,484 357,742 (27,667) 4,549,559Machinery and Equipment 1,618,065 109,074 (67,512) 1,659,627

Total capital assets, being depreciated/amortized 6,079,710 489,857 (95,492) 6,474,075

Less accumulated depreciation for:Improvements other than buildings (97,031) (7,528) 28 (104,531)Buildings (1,609,440) (122,412) 17,161 (1,714,691)Machinery and Equipment (1,146,154) (100,864) 49,334 (1,197,684)

Total accumulated depreciation (2,852,625) (230,804) 66,523 (3,016,906)

Total capital assets, being depreciated/amortized, net 3,227,085 259,053 (28,969) 3,457,169

Component units capital assets, net 4,184,238$ 820,609$ (162,693)$ 4,842,154$

Depreciation expense, charged to functions/programsof discretely presented major component units as follows:(Expressed in Thousands)Kentucky Housing Corporation 445$ Kentucky Higher Education Student Loan Corporation 105University of Kentucky 134,374University of Louisville 62,567Kentucky Community and Technical College System 31,987Kentucky Lottery Corporation 1,326

Total depreciation expense by functions/programs 230,804$

ActivitiesBusiness-type

ActivitiesGovernmental


86

Note 7

INTERFUND TRANSACTIONS

Interfund Transfers In and Out The table below shows the interfund operating transfers for fiscal year 2015 (Expressed in Thousands):

Transfers Out

General Fund $ $ $ 1,340 $ 74,010 $Transportation Fund 993 220 Federal Fund 51 Agency Revenue Fund 36,431 9,138 4,603 Capital Projects Fund 4,566 6,752 666 22,496 Debt Service 527,547 11,370 64,214 1,741 155 Non-Major Governmental Funds 119,507 149,596 7,250 295,383 State Parks Fund 34,047 270 274 Kentucky Horse Park Fund 2,472 575 Insurance Administration Fund 91 30 Unemployment Compensation FundInternal Service Funds 906 62,970 Fiduciary Funds 17

Total $ 725,567 $ 167,718 $ 82,908 $ 394,640 $ 68,848

Reasons for transfers:1) to move resources from the General Fund, for budgetary purposes, to the fund that will expend them; 2) to move resources from funds recording the revenue to the Debt Service Fund, for debt service payments; 3) to move resources from the funds recording the revenue to the Capital Projects Fund to finance acquisition of capital assets.

CapitalProjects

FundFederal

Fund

AgencyRevenue

FundTransfers In General

FundTransportation

Fund

Interfund Receivables and PayablesThe table below shows the interfund receivables and payables for fiscal year 2015(Expressed in Thousands):

General Fund $ $ $ 38,005 $ 11,796 $ 4Transportation Fund 155 379 272Federal Fund 22,222 5,246Agency Revenue Fund 32,260 110 34,326 10

Capital Projects Fund 5 12 400 Debt ServiceNon-Major Governmental Funds 8,386 11 294 6,838 60State Parks Fund 40Kentucky Public Employees Health Plan 63,181 1,489 1,446 1,704 1Insurance Administration Fund 93 30 108Unemployment Insurance FundInternal Service Funds 4,181 10 215

Total $ 130,368 $ 1,620 $ 74,238 $ 26,608 $ 455

Reasons for interfund payables and receivables:1) to record sales by proprietary funds to other funds;2) to record reimbursements of expenditures made in one fund for another fund;3) to distribute program cost among funds; and4) to record short-term loans from one fund to another.

Fund

Interfund Payables

FederalFund

AgencyRevenue

FundInterfund ReceivablesGeneral

FundTransportation

Fund

CapitalProjects


87

Transfers OutDebt Insurance

Service AdministrationFund

$ $ 16,948 $ $ 93,000 $ 11,011 $ $ 2,000 $ 2,524 $ 200,833 30 143 1,386

51 491 347,453 3,799 34,155 570 32 436,672

2,109 2,952 39,541 28,354 376 289 634,046

173,988 745,724 34,591

3,047 121

94 94 63,876

1,000 1,017 $ 491 $ 568,946 $ 406 $ 93,000 $ 18,762 $ 34,155 $ 2,859 $ 2,699 $ 2,160,999

FiduciaryFunds Total

InternalServiceFunds

KentuckyPublic Employees

Health Plan FundCompensationUnemployment

FundParksStateNon-Major

GovernmentalFundsFund

$ 58,338 $ 5,212 $ 36 $ 534 $ $ 1,722 $ 115,647487 1,293

253 27,72118,950 45 12 3,991 1 89,705

900 1,31715 15

119,978 68 707 2,138 138,4801 41

9 256 23 124 267 68,5001 232

94 9469 4,475

$ 198,537 $ 5,605 $ 105 $ 1,378 $ 3,991 $ 4,615 $ 447,520

Non-MajorGovernmental

Funds

StateParksFund Funds


Fund

Interfund PayablesUnemploymentCompensation

Fund Total

InternalService

KentuckyHorse Park

Fund


88

Note 8

PENSION PLANS AND OTHER POSTEMPLOYMENT BENEFITS

Kentucky Retirement Systems

Under the provisions of Kentucky Revised Statutes (KRS) 61.645, the Board of Trustees of the Kentucky Retirement Systems ad-ministers the Kentucky Employees Retirement System (KERS), County Employees Retirement System (CERS), and State Police Retirement System (SPRS).

The Commonwealth contributes to the KERS, a multiple-employ-er cost sharing defined benefit pension plan that covers substantial-ly all regular full-time members employed in non-hazardous and hazardous duty positions of any state department, board, or any agency directed by Executive Order to participate in the System. The plan provides for retirement, disability, and death benefits to plan members. Retirement benefits may be extended to beneficia-ries of the plan members under certain circumstances.

CERS, a multiple employer cost sharing defined benefit pension plan, provides for retirement, disability, and death benefits to plan members.

SPRS is a single-employer defined benefit plan that covers all full-time State Troopers employed in a hazardous duty position by the Kentucky State Police. The plan provides for retirement, disabil-ity, and death benefits to plan members. Retirement benefits may be extended to beneficiaries of the plan members under certain circumstances.

The financial statements are prepared using the accrual basis of ac-counting which is the same method used by all retirement plans of the Commonwealth. Plan member contributions are recognized in the period in which contributions are due. Employer contributions to the plan are recognized when due and the employer has made a formal commitment to provide the contributions. Benefits and refunds are recognized when due and payable in accordance with terms of the plan.

Investments are reported at fair value. Short-term investments are reported at cost, which approximates fair value. Securities traded on a national exchange are valued at the last reported sales price at current exchange rates. The fair value of real estate is based on appraisals. Investments that do not have an established market are reported at estimated fair value.

The Kentucky Retirement System issues a publicly available finan-cial report that includes financial statements and required supple-mentary information for the above mentioned retirement systems. That report may be obtained by writing the Kentucky Retirement System, 1260 Louisville Road, Frankfort, Kentucky 40601-6124, or by telephone at (502) 564-4646 or online at www.kyret.ky.gov.

Kentucky Judicial Form Retirement System

The Judicial Retirement Plan is governed by KRS Chapter 21 Sec-tion 345 through Section 580. A single employer defined benefit plan, which provides retirement, disability and death benefits to plan members and their beneficiaries

The Legislators' Retirement Plan is a single employer defined ben-efit plan providing retirement, disability, and death benefits to plan members and their beneficiaries.

The financial statements are prepared using the accrual basis of accounting. Plan member contributions to the plan are recognized when due and the employer has made formal commitment to pro-vide the contributions. Benefits and refunds are recognized when due and payable in accordance with terms of the Plans.

Investments are reported at fair value. Securities traded on a na-tional exchange are valued at the last reported sales price at cur-rent exchange rates. Investments that do not have an established market are reported at estimated fair value.

The Judicial Form Retirement System issues a publicly available financial report that includes financial statements and required supplementary information for the above mentioned retirement systems. That report may be obtained by writing to the Judicial Form Retirement System, P.O. Box 791, Frankfort, Kentucky 40602-0791, or by telephone at (502) 564-5310 or online at www.finance.ky.gov.

Kentucky Teachers’ Retirement System

The Kentucky Teachers' Retirement System (KTRS) was estab-lished by the 1938 General Assembly and is governed by Chap-ter 161 Section 220 through Section 990 of the Kentucky Revised Statutes. KTRS is a multiple-employer cost sharing defined ben-efit plan established to provide pension plan coverage for local school districts and other educational agencies in the state.

The financial statements are prepared on the accrual basis of ac-counting. Member contributions and employer matching are recognized in the fiscal year due. Plan investments are reported at fair value. Short-term securities are carried at cost, which ap-proximates fair value. Fixed income and common and preferred stocks are generally valued based on published market prices and quotations from national security exchanges and security pricing services. Real estate is primarily valued based on appraisals per-formed by independent appraisers.

The Kentucky Teachers' Retirement System issues a publicly available financial report that includes financial statements and re-quired supplementary information. That report may be obtained by writing the Kentucky Teachers' Retirement System, 479 Ver-sailles Road, Frankfort, Kentucky 40601, or by telephone at (502) 848-8500 or online at www.ktrs.ky.gov.


89

Tier 1 Tier 2 Tier 3Participation Prior to Participation Participation on or after

9/1/2008 9/1/2008 through 12/31/2013 1/1/2014

Covered Employees:

Benefit Formula: Cash Balance Plan

Final Compensation: Average of the highest 5 fiscal years (must contain at least 48 months). Includes lump-sum compensation payments (before and at retirement).

5 complete fiscal years immediately preceding retirement; each year must contain 12 months. Lump-sum compensation payments (before and at retirement) are not to be included in creditable compensation.

No Final Compensation

Benefit Factor: 1.97%, or 2.0% for those retiring with service for all months between 1/1998 and 1/1999.

10 years or less = 1.10%. Greater than 10 years, but no more than 20 years = 1.30%. Greater than 20 years, but no more than 26 years = 1.50%. Greater than 26 years, but no more than 30 years = 1.75%. Additional years above 30 = 2.00% (2.00% benefit factor only applies to service earned in excess of 30 years).

No benefit factor. A life annuity can be calculated in accordance with actuarial assumptions and methods adopted by the board based on member’s accumulated account balance.

Cost of Living Adjustment (COLA):

Unreduced Retirement Benefit: Any age with 27 years of service. Age 65 with 48 months of service. Money Purchase for age 65 with less than 48 months based on contributions and interest.

Any age with 25 years of service. Age 55 with 5 years of service.

Age 60 with 10 years of service. Excludes purchased service (exception: refunds, omitted, free military).

No reduced retirement benefitReduced Retirement Benefit:

No COLA unless authorized by the Legislature with specific criteria. This impacts all retirees regardless of Tier.

Substantially all regular full-time members employed in non-hazardous and hazardous duty positions of any state department, board, or any agency directed by Executive Order to participate in the system.

Kentucky Employees' Retirement SystemGovernance KRS 61.510 through KRS 61.705

Non-Hazardous

Final Compensation X Benefit Factor X Years of Service

Rule of 87: Member must be at least age 57 and age plus earned service must equal 87 years at retirement to retire under this provision. Age 65 with 5 years of earned service. No Money Purchase calculations.

Cost Sharing Multiple Employer Defined Benefit


90

Tier 1 Tier 2 Tier 3Participation Prior to Participation Participation on or after

9/1/2008 9/1/2008 through 12/31/2013 1/1/2014

Covered Employees:



Average of the highest 3 fiscal years; each year must contain 12 months. Lump-sum compensation payments (before and at retirement) are not to be included in creditable compensation.


Benefit Factor: 2.49% 10 years or less = 1.30%. Greater than 10 years, but no more than 20 years = 1.50%. Greater than 20 years, but no more than 25 years = 2.25%. 25 years and greater = 2.50%.



Unreduced Retirement Benefit: Any age with 20 years of service. Age 55 with 60 months of service. Money Purchase for age 55 with less than 60 months based on contributions and interest.

Reduced Retirement Benefit: Age 50 with 15 years of service. Age 50 with 15 years of service. Excludes purchased service (exception: refunds, omitted, free military).

No reduced retirement benefit

Any age with 25 years of service. Age 60 with 5 years of service. No Money Purchase calculations.

Kentucky Employees' Retirement SystemGovernance KRS 61.510 through KRS 61.705

Hazardous

Substantially all regular full-time members employed in non-hazardous and hazardous duty positions of any state department, board, or any agency directed by Excutive Order to participate in the system.



Cost Sharing Multiple Employer Defined Benefit


91

Tier 1 Tier 2 Tier 3Participation before Participation on or between Participation on or after

9/1/2008 9/1/2008 and 12/31/2013 1/1/2014

Covered Employees:

Benefit Formula: Final Compensation X Benefit Factor X Years of Service

Final Average Compensation X Years of Service

No benefit formula. A life annuity can be calculated in accordance with actuarial assumptions and methods adopted by the board based on member’s accumulated account balance.


Average of the highest 3 fiscal years; each year must contain 12 months. Lump sum compensation payments (before and at retirement) are not to be included in creditable compensation.


Benefit Factor: 2.50% 10 years or less = 1.30%. Greater then 10 years, but no more than 20 years = 1.50%. Greater than 20 years, but no more than 25 years = 2.25%. 25 years and greater = 2.50%.



Unreduced Retirement Benefit: Any age with 20 years of service. Age 55 with 60 months of service. Money purchase for age 55 with less than 60 months based on contributions and interest.

Reduced Retirement Benefit: 6.50% for each year fewer than 20 years or age 55.

6.50% for each year fewer than 25 years or age 60.

No reduced retirement benefit

Single Employer Defined Benefit

All full-time state trooper employed in a hazardous duty position by the Kentucky State Police.


Any age with 25 years of service. Age 60 with 5 years of service. No Money Purchase calculations.

State Police Retirement SystemGovernance KRS 16.505 through KRS 16.652


92

Tier 1 Tier 2 Tier 3 Tier 4

Participation prior to Participation between Participation between Participation on or after

7/1/1978 7/1/1978 and 6/30/1980

7/1/1980 and 1/1/2014

1/1/2014

Covered Employees:


Final Compensation: No Final Compensation

Benefit Factor: 5.0% if service continued without interruption; not to exceed 100% of final average compensation.

4.15%, not to exceed 100% of final average compensation.

2.75%, not to exceed 100% of final average compensation.

No benefit factor. A life annuity can be calculated in accordance with actuarial assumptions and methods adopted by the board based on the member’s accumulated account balance.


Any cost of living adjustment will be granted providing the following requirements are met: the funding level of Judicial Hybrid Cash Balance Plan is 100% and subsequent legislation authorizes the use of any surplus actuarial assets to provide for the increase and the Kentucky General Assembly appropriates sufficient funds to fully prefund the increase.

Unreduced Retirement Benefit:

None

Reduced Retirement Benefit:

None

1.5% yearly on July 1 if the funding level is 100% and subsequent legislation authorizes the use of any surplus actuarial assets to provide for increase and the Kentucky General Assembly appropriates sufficient funds to fully prefund the increase.

8 years of service and age 65. The age 65 requirement shall be reduced by 1 year for each 5 years of service and 1 year for each year beyond the years of service needed to accrue a benefit of 100%. The age requirement will never be reduced below 60.5% per year for each year under normal retirement age.

Judicial Retirement PlanGovernance KRS 21.345 through KRS 21.580


District, Circuit, Court of Appeals, and Supreme Court Judges may, within 30 days after taking office, elect to make monthly contributions, and thereby become eligible for membership in the plan.


Average of 36 months of service immediately preceding retirement before 1/1/2009. Average of 60 months of service immediately preceding


93

Tier 1 Tier 2 Tier 3 Tier 4Participation prior to Participation between Participation between Participation on or after

7/1/1978 7/1/1978 and 6/30/1980 7/1/1980 and 12/31/2013

1/1/2014

Covered Employees:


Final Compensation: No Final Compensation

Benefit Factor: 5.0% for all service that continues without interruption thereafter, not to exceed 100% of final average compensation; 2.75% for all other service .

4.15% for all service that continues without interruption thereafter not to exceed 100% of final average compensation; 2.75% for all other service.

3.5% for all service that continues without interruption thereafter, not to exceed 100% of final average compensation; 2.75% for all other service.

No benefit factor. A life annuity can be calculated in accordance with actuarial assumptions and methods adopted by the board based on the member’s accumulated account balance.

Cost of Living Adjustment(COLA):

Any cost of living adjustment will be granted providing the following requirements are met: the funding level of Legislative Hybrid Cash Balance Plan is 100% and subsequent legislation authorizes the use of any surplus actuarial assets to provide for the increase and The Kentucky General Assembly appropriates sufficient funds to fully prefund the increase.

Unreduced Retirement Benefit:

None


None

1.5% yearly on July 1 if the funding level is 100% and subsequent legislation authorizes the use of any surplus actuarial assets to provide for increase and the Kentucky General Assembly appropriates sufficient funds to fully prefund the increase.

Members who have attained age 65 and completed at least 5 years of legislative service or have service under other state authorized system when added to Legislative service will equal at least 8 years of service. The age 65 requirement shall be reduced by 1 year for each 5 years of service and 1 year for each year beyond the years of service needed to accrue a benefit of 100%.

5% per year for each year under normal retirement age.

Legislators' Retirement PlanGovernance KRS 6.500 through KRS 6.577


Members of the General Assembly may elect to make monthly contributions within 30 (thirty) days of taking office, and thereby become eligible for membership in the plan. Individuals commencing participation on or after January 1, 2014, will participate in the hybrid plan .


The average compensation for the highest 36 months of state salary.


94

Tier 1 Tier 2Participation prior to Participation on or after

7/1/2008 7/1/2008

Covered Employees:

Benefit Formula:

Final Compensation: Average of the highest 5 annual salaries reduced 5% per year from the earlier of age 60 or the date 27 years of service would have been completed. Average of the highest 3 annual salaries if age 55 with 27 or more years of service. The minimum annual service allowance for all members is $440 multiplied by credited service.

Average of the highest 5 annual salaries reduced 6% per year from the earlier of age 60 or the date 27 years of service would have been completed. Average of the highest 3 annual salaries if age 55 with 27 or more years of service. The minimum annual service allowance for all members is $440 multiplied by credited service.

Benefit Factor: Non-University members: 2.00% for service prior to 7/1/1983; 2.50% for service after 7/1/1983; 2.00% if participation after 7/1/2002 and less than 10 years; 2.50% if participation after 7/1/2002 and more than 10 years; 3.00% if retire after 7/1/2004 with more than 30 years. University members: 2.0% for each year of service.

Non-University members: 1.70% if less than 10 years; 2.00% if greater than 10 years, but no more than 20 years; 2.30% if greater than 20 years, but no more than 26 years; 2.50% if greater than 26 years, but no more than 30 years; 3.00% for service greater than 30 years. University members: 1.50% if less than 10 years; 1.70% if greater than 10 years, but less than 20 years; 1.85% if greater than 20 years, but less than 27 years; 2.00% if greater than 27 years.


Unreduced Retirement Benefit: Any age with 27 years of Kentucky service. Age 55 with 5 years of Kentucky service.

Any age with 27 years of Kentucky service. Age 60 with 5 years of Kentucky service. Age 55 with 10 years of Kentucky service.


Kentucky Teachers' Retirement SystemGovernance KRS 161.220 through KRS 161.990

Cost Sharing Multiple Employer Defined Benefit with Special Funding


Must be retired for service or disability to be eligible. Retired members are given a supplement based upon a contribution supplement table approved by the KTRS Board of Trustees. The retired member pays premiums in excess of the monthly supplement.

1.5% annually additional ad hoc increases must be authorized by the General Assembly.

Provides pension plan coverage for local school districts and other educational agencies in the state.


95


96

Non-Hazardous Hazardous

17.29% 14.89% 39.5%

5.00% 8.00% 8.00%

$202,891 $11,670 $20,279

June 30, 2014 June 30, 2014 June 30, 2014

Entry age Entry age Entry age

Level percent closed Level percent closed Level percentage of payroll closed

29 years 29 years 29 Years

Five-year smoothed Market Five-year smoothed Market Five-year smoothed Market

Investment rate of return 7.75% 7.75% 7.75%Inflation Rate 3.50% 3.50% 3.50%Projected salary increases 4.5% , average , including

inflation4.5% , average , including

inflation4.5% , average , including

inflation

1983 Group Annuity Mortality Table for retired members and beneficiaries as of June 30,2006. 1994 Group Mortality Table for all other members. The Group Annuity Mortality Table set forward 5 years is used for the period after disability retirement.

The period July1, 2005 - June 30, 2008



No update procedures were required.



Retirees and beneficiaries receiving benefits 38,022 2,467 1,413 Inactive members 41,213 3,318 408 Active plan members 40,500 4,094 855 Total 119,735 9,879 2,676

354 354 1

1983 Group Annuity Table for all retired members and beneficiaries as of June 30, 2006, and the 1994 Group Annuity Mortality Table for all other members.

Mortality Tables

Date of Experience Study

Membership Information

Actuarial Cost Method

Remaining amortization period

Asset valuation method

Actuarial assumptions:

Update procedures applied

Employer Contribution

Member Contribution

Contributions made in thousands

Actuarial Valuation Date

Amortization Method

Kentucky Employees' Retirement System

State Contribution as a percentage of nonemployer special funding situation

Number of participating employers

State Police Retirement System


97

33% 37% 10.875% - 13.355%

11.56% - 13% 7.625% - 9.105%

$10,805 $1,825 $563,326

July 1, 2013 July 1, 2013 June 30, 2013

Entry age normal funding method Entry age normal funding method Entry age

Interest + 1% Unfunded past liability Interest + 1% Unfunded past liability Level percent closed

25 Years 25 Years 30 Years

Market Value Market Value Five-year smoothed Market

6.15% 6.50% 7.50%3.00% 3.00% 3.50%

1% for the next five years, thereafter 3.5% 1% for the next five years, thereafter 3.5% 4.00-8.2%, including inflation

RP-2000 Combined Mortality Table projected to 2020 using scale AA (set back one year for females) is used for death after service retirement and beneficiaries. The RP-2000 Disability Mortality Table (set back seven years for males and set forward five years for females) is used for death after disability retirement. Mortality improvement is anticipated under these assumptions as recent morality experience shows actual deaths are approximately 4% greater for the healthy lives and 5% greater for disabled lives than expected under the selected tables.

Information not available Information not available July 1, 2005- June 30, 2010

The actuarial valuation was last performed as of June 30, 2013, and is roll-forward for June 30, 2014, using roll forward techniques. The roll forward calculation adds the annual normal cost (also called the service cost), subtracts the actual benefit payment and refunds for the plan year and then applies the assumed index rate increase from 4.27& to 4.35%, resulting in a change in the SEIR from 5.16% to 5.23%. The impact of this change in the discount rate is a change in assumptions that is added to the expected TPL Total Penion Liability) to determine the final TPL as of June 30, 2014.

308 186 48,576 18 42 35,451

276 119 73,407 602 347 157,434

1 1 208

Members entering the plan prior to September 1, 2008, must contribute 5%. Members entering the plan on or after September 1, 2008, contribute 6% of official salary. Members joining July 1, 2014, or later contribute 5% to a hybrid cash account.

IRS Mortality Tables without collar adjustment with Pre- and Post-Commencement Rates with projected mortality improvements after year 2000 under Project Scale AA (males and female scales.)

The actuarial valuation was last performed as of July 1, 2013, and is roll-forward for July 1, 2014. The roll forward method employs generally accepted actuarial techniques. The results in this report have been developed with full reliance on the July 1, 2013, Actuarial Valuation Report and does not include any hybrid plan liabilities. At the measurement date, the hybrid plan had one member.

Judicial Retirement Plan Legislators' Retirement Plan Kentucky Teachers' Retirement System


98

Kentucky Judicial Retirement System

The long-term expected rate of return on Judicial and Legislators’ Plan investments was determined using a building-block method in which best-estimate ranges of expected future real rates of re-turn (expected returns, net of pension plan investment expenses and inflation) are developed for each major asset class. These rang-es are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. Best estimates of arithmetic real rates of return for each major asset class included in the Judicial and Legislators’ Plan’s target asset al-location as of June 30, 2014 are summarized in the following table:

Asset Class Long-Term Expected Real Rate of Return

Domestic Equity 5.05%

International Equity 5.45%

Fixed Income 0.55%

Cash (1.85%)

The discount used to measure the total pension liability was 6.15%, a decrease from the 7.00% discount rate used as of July 1, 2013. The projection of cash flows used to determine the discount rate assumed that plan member contributions will be made at the cur-rent contribution rate and that employer contribution will be made at the current statutory contribution rate. Based on those assump-tions, the Judicial Pension Plan’s fiduciary net position was pro-jected to be available to make all projected future benefit payments of current plan members through June 30, 2046. The long-term expected rate of return on the Judicial Pension Plan’s investments was applied to periods of projected benefit payments through this date, and the municipal bond rate, determined by using the 20-year municipal AA bond yield at July 1, 2014, for the periods thereafter to determine the total pension liability. The discount used to mea-sure the total pension liability on the second bases was 7.00% for 32 years, and 3.80% thereafter. This is equivalent to an average assumed rate of return of approximately 6.15%.

The following presents the net pension liability of the Judicial Plan, calculated using the discount rate of 6.15%, as well as what the Judicial Plan’s pension liability would be if it was calculated using a discount rate that is 1% point lower (5.15%) or 1% point higher (7.15%) than the current rate:

1% Current 1%

Decrease Discount Increase

(5.15%) Rate (6.15%) (7.15%)

Net Pension Liability $ 161,338 $ 122,422 $ 89,738

Kentucky Judicial Retirement System

(Expressed in Thousands)

Kentucky Legislators’ Retirement System

The discount used to measure the total pension liability was 6.50%, a decrease from the 7.00% discount rate used as of July 1, 2013. The projection of cash flows used to determine the discount rate assumed that plan member contributions will be made at the current contribution rate and that employer contribution will be made at the current statutory contribution rate. Based on those as-sumptions, the Legislative Pension Plan’s fiduciary net position was projected to be available to make all projected future benefit payments of current plan members through June 30, 2053. The long-term expected rate of return on the Legislative Pension Plan’s investments was applied to periods of projected benefit payments through this date, and the municipal bond rate, determined by us-ing the 20-year municipal AA bond yield at July 1, 2014, for the periods thereafter to determine the total pension liability. The dis-count used to measure the total pension liability on the second bas-es was 7.00% for 39 years, and 3.80% thereafter. This is equivalent to an average assumed rate of return of approximately 6.50%.

The following presents the net pension liability of the Legislators Plan, calculated using the discount rate of 6.50%, as well as what the Legislative Plan’s pension liability would be if it was calcu-lated using a discount rate that is 1% point lower (5.50%) or 1% point higher (7.50%) than the current rate:

1% Current 1%


(5.50%) Rate (6.50%) (7.50%)


Kentucky Legislators' Retirement System


Kentucky State Police Retirement System and Kentucky Em-ployee Non-Hazardous and Hazardous Retirement System

The long-term expected return on plan assets is reviewed as part of the regular experience studies prepared every five years for the Systems. The most recent analysis, performed for the period covering fiscal years 2005 through 2008, is outlined in a report dated August 25, 2009. Several factors are considered in evaluat-ing the long-term rate of return assumption including long-term historical data, estimates inherent in current market data, and a log – normal distribution analysis in which best-estimate ranges of expected future real rates of return (expected return, net of in-vestment expense and inflation) were developed by the investment consultant for each major asset class. These ranges were combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and then adding expected inflation. The capital market assumptions developed by the investment consultant are intended


99

Asset Class Target Allocation Long-Term Nominal Rate of Return

Domestic Equity 30% 8.45%

International Equity 22% 8.85%

Emerging Market Equity 5% 10.5%

Private Equity 7% 11.25%

Real Estate 5% 7%

Core U.S. Fixed Income 10% 5.25%

High Yield U.S. Fixed Income 5% 7.25%

Non U.S. Fixed Income 5% 5.5%

Commodities 5% 7.75%

TIPS 5% 5%

Cash 1% 3.25%

Total 100%


The discount rate used to measure the total pension liability was 7.75%. The projection of cash flow used to determine the discount rate assumed that local employers would contribute the actuarially determined contribution rate of projected compensation over the remaining 29 year of amortization period of the unfunded actuarial accrued liability. The actuarial determined contribution rate is ad-justed to reflect the phase of anticipated gains on actuarial value of assets over the first four years of the projection period. The dis-count rate determination does not use a municipal bond rate. Pro-jected future benefit payments for all current plan members were projected through 2116. The following presents the net pension liability of SPRS, and KERS calculated using the discount rate of 7.75%, as well as what the net position liability would be if it were calculated using a discount rate that is one percentage point lower (6.75%) or one percentage point higher (8.75%) than the current rate for non-hazardous and (6.75%) or one percentage point higher (8.75%) than the current rate for hazardous:

1% Current 1%


(6.75%) Rate (7.75%) (8.75%)



State Police Retirement System - Hazardous

for use over a 10-year horizon and may not be useful in setting the long-term rate of return for funding pension plans which covers a longer timeframe. The assumption is intended to be a long-term as-sumption and is not expected to change absent a significant change in the asset allocation, a change in the inflation assumption, or a fundamental change in the market that alters expected returns in future years.

The target asset allocation and best estimates of arithmetic nomi-nal rates of return for each major asset class are summarized in the following table:

1% Current 1%


(6.75%) Rate (7.75%) (8.75%)

Net Pension Liability $ 6,898,708 $ 6,132,337 $ 5,441,387

1% Current 1%


(6.75%) Rate (7.75%) (8.75%)


Kentucky Employees' Retirement System Non-Hazardous

Kentucky Employees' Retirement System - Hazardous



Kentucky Teachers’ Retirement System

The long-term expected rate of return on pension plan investments was determined using a log-normal distribution analysis in which best-estimate ranges of expected future real rates of return (expect-ed returns, net of pension plan investment expense and inflation) are developed for each major asset class. These ranges are com-bined to produce the long-term expected rate of return by weight-ing the expected future real rates of return by the target asset al-location percentage and by adding expected inflation.

The target allocation and best estimates of arithmetic real rates of return for each major asset class, as provided by KTRS’s invest-ment consultant, are summarized in the following table:

Asset Class Target Allocation

U.S. Equity 45% 6.4%

Non U.S. Equity 17% 6.5%

Fixed Income 24% 1.6%

High Yield Bonds 4% 3.1%

Real Estate 4% 5.8%

Alternatives 4% 6.8%

Cash 2% 1.5%

Total 100%

Long-Term Nominal Rate of Return

Kentucky Teachers' Retirement System


100

The discount rate used to measure the total pension liability was 5.23%. The projection of cash flows used to determine the dis-count rate assumed that plan member contributions will be made at the current contribution rates and the Employer contributions will be made at statutorily required rates. Based on those assump-tions, the pension plan’s fiduciary net position was projected to be available to make all projected future benefit payments of current plan members until the 2036 plan year. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments through 2035 and a municipal bond index rate of 4.35% was applied to all periods of projected benefit payments after 2035. The Single Equivalent Interest Rate (SEIR) that discounts the entire projected benefit stream to the same amount as the sum of the present values of the two separate benefit payments streams was used to determine the total pension liability.

The following table presents the net pension liability of the Sys-tem, calculated using the discount rate of 5.23%, as well as what the System’s net pension liability would be if it were calculated using a discount rate that is 1-percentage-point lower (4.23%) or 1-percentage-point higher (6.23%) than the current rate:

1% Current 1%


(4.23%) Rate (5.23%) (6.23%)

State as employer $ 461,724 $ 367,576 $ 289,877

State as a nonemployer special funding sitution 25,299,258 20,140,619 17,027,992

Total Net Pension Liability $ 25,760,982 $ 20,508,195 $ 17,317,869




101


102

Differences between expected and actual experience $ $ $ $Changes in assumptions 23,495 4,106 275,029Net difference between projected and actual earnings on investments 167,662 1,223,913Change in proportionate shareContributions subsequent to the measurement date 429,744 471,493Total $ 453,239 $ 171,768 $ 471,493 $ 1,498,942

Differences between expected and actual experience $ $Changes in assumptions 3,311Net difference between projected and actual earnings on investmentsChange in proportionate shareContributions subsequent to the measurement date 13,621Total $ 13,621 $ 3,311

Differences between expected and actual experience $ $ 14,856Changes in assumptionsNet difference between projected and actual earnings on investments 4,654Change in proportionate shareContributions subsequent to the measurement date 26,242 Total $ 26,242 $ 19,510

Of Resources Of Resources Deferred InflowsDeferred Outflows

Deferred InflowsOf Resources


Deferred InflowsDeferred Outflows

Deferred Outflows

Deferred Outflows

as Employer

Major Component Units

Of Resources

ActivitiesBusiness-Type


For the Year Ended June 30, 2015, the Commonwealth of Kentucky recognized pension expenses of $497,779,000 as an employer and $986,931,000 as a Governmental Nonemployer Contributing Entity to Kentucky Teachers Retirement System. Deferred outflows and deferred inflows related to pensions are from the following sources:

Of Resources

NonemployerSpecial Funding Situation

Of Resources

Primary Government(Expressed in Thousands)

For the Year Ended June 30, 2015, The Commonwealth of Kentucky recognized pension expenses of $17,794,000 and deferred outflows and deferred inflows related to pensions from the following sources:

Major Component Units recognized pension expenses of $34,192,000 and deferred outflows and deferred inflows related to pensions from the following sources:

Governmental Activities

Of Resources Of Resources Deferred Inflows

Employer


103

Governmental Business-Type Activities Component Units-Major

2016 $ (32,292) $ (266,025) $ (707) $ (4,646) 2017 (32,308) (266,025) (706) (4,646) 2018 (36,806) (266,025) (706) (4,648) 2019 (41,634) (266,025) (706) (4,648) 2020 (4,667) (266,025) (487) (922) Thereafter (566) (168,817)

Component UnitsMajors

Nonemployer

(Expressed in Thousands)Activities

Primary Government reports $902,253,000 and Major Component Units report 26,242,000 as deferred outflows resulting from contributions made subsequent to the measurement date. Outflows from deferred contributions will reduce the net pension liability for the year end June 30, 2016, as reflected below. Other amounts reported as deferred outflows will be recognized in pension expense as follows:

Primary Government

Year ended June 30: Special Funding Situation


104

Schedule of Retiree Health Insurance Benefit and Eligibility

Tier 1 Tier 2 Tier 3Participation before 7/1/2003 Participation on or after 7/1/2003 Participation on or after 1/1/2014

Based on years of service and type of service, JRS pays a percentage of the monthly contribution rate as follows: 20 or more years of service, 100% paid; 15 to 19 years 11 months of service, 75% paid; 10 to 14 years 11 months of service, 50% paid; 4 to 9 years 11 months of service, 25% paid; Less than 4 years of service, 0% paid.

10 years for eligibility. Benefit of $10 per month for each year of earned service without regard to maximum dollar amount; adjusted by 1.5% annually.


Tier 1 Tier 2 Tier 3

Participation before 7/1/2003 Participation on or after 7/1/2003 Participation on or after 1/1/2014

Based on years of service and type of service, KRS pays a percentage of the monthly contribution rate as follows: 20 or more years of service, 100% paid; 15 to 19 years of service, 75% paid; 10 to 14 years of service, 50% paid; 4 to 9 years of service, 25% paid; Less than 4 years of service, 0% paid.



Based on years of service and type of service, KRS pays a percentage of the monthly contribution rate as follows: 20 or more years of service, 100% paid; 15 to 19 years of service, 75% paid; 10 to 14 years of service, 50% paid; 4 to 9 years of service, 25% paid; less than 4 years of service, 0% paid.

10 years for eligibility. Benefit of $15 per month for each year of earned service without regard to maximum dollar amount; adjusted by 1.5% annually. $10 per month for each year of hazardous service for surviving spouse of deceased member.

15 years for eligibility. Benefit of $15 per month for each year of earned service without regard to maximum dollar amount; adjusted by 1.5% annually. $10 per month for each year of hazardous service for surviving spouse of deceased member.


Hazardous (includes State Police)

Non-Hazardous

Judicial Retirement System


105

Tier 1 Tier 2 Tier 3Participation before 7/1/2003 Participation on or after 7/1/2003 Participation on or after 1/1/2014

Based on years of service, LRS pays a percentage of the monthly contribution rate as follows: 20 or more years of service, 100% paid; 19 to 19 years 11 months, 95% paid; 18 years to 18 years 11 months, 90% paid; 17 years to 17 years 11 months, 85% paid; 16 years to 16 years 11 months, 80% paid; 15 years to 15 years 11 months, 75% paid; 14 years to 14 years 11 months, 70% paid; 13 years to 13 years 11 months, 65% paid; 12 years to 12 years 11 months, 60% paid; 11 years to 11 years 11 months, 55% paid; 10 years to 10 years 11 months, 50% paid; 4 to 9 years 11 months of service, 25% paid; less than 4 years of service, 0% paid.

10 years of earned service at retirement to be eligible for insurance benefits. Benefit of $10 per month for each year of earned service without regard to a maximum dollar amount; adjusted annually.

15 years of earned service at retirement to be eligible for insurance benefits. Benefit of $15 per month for each year of earned service without regard to a maximum dollar amount; adjusted annually.

Legislators' Retirement System

To be eligible for medical benefits, the member must have retired either for service or disability. The KTRS medical plan offers coverage to members under the age of 65 through the Kentucky Employees Health Plan administered by the Kentucky Department of Employee Insurance. KTRS retired members are given a supplement to be used for payment of their health insurance premium. The amount of the member's supplement is based on a contribution supplement table approved by the KTRS Board of Trustees. The retired member pays premiums in excess of the monthly supplement. The Commonwealth of Kentucky bears risk for excess claims expenses that exceed the premium equivalents charged for the Kentucky Employees Health Plan. Once retired members and eligible spouses attain age 65 and are Medicare eligible, coverage is obtained through the KTRS Medicare Eligible Health Plan.



106

Schedule of Insurance Actuarial Information


Kentucky Kentucky

Judicial Legislators'

Contribution rates: Retirement Plan Retirement Plan

State 2.00%

Plan members 1.00%

Annual required contribution (ARC) $1,274

Contributions made $1,274

Actuarial valuation date July 1, 2015 July 1, 2015

Actuarial cost method Entry age normal funding method Entry age normal funding method

Amortization methodInterest + 1% Unfunded Past Liability

openInterest + 1% Unfunded Past Liability

open

Remaining amortization period 25 years 25 years

Asset valuation method Market value Market value

Actuarial assumptions:

Investment rate of return 6.41% 6.85%

Inflation Rate 3% 3%

Projected salary increases 1% 1%

Increases in Health

Insurance Cost 11% 11%

Actuarial Required Contribution (ARC) 1,274$ $

Interest on NOPEBO 72 (20)

Adjustment to ARC (90) (23)

Annual pension cost 1,256 (43)

Contributions made 1,274

Increase (Decrease) in NOPEBO (18) (43)

NOPEBO beginning of year 1,118 (290)

NOPEBO as of 6/30/15 1,100$ (333)$

Percentage APC contributed 101.4%

June 30, 2014

Annual Pension Cost 884$ 5$

Percentage APC Contributed 72%

NOPEBO as of 6/30/14 1,118$ (290)$

June 30, 2013

Annual Pension Cost 886$ 3$

Percentage APC Contributed 68.9%

NOPEBO as of 6/30/13 868$ (295)$


107

State Police Kentucky Teachers'

Retirement Retirement

System Non-Hazardous Hazardous System

21.86% 7.93% 9.97% 0.78%

1.00% 1.00% 1.00% 3.00%

$9,890 $130,455 $13,152 $107,656

$10,382 $135,940 $14,882 $169,103

June 30, 2015 June 30, 2015

Entry age Entry age

Level percent closed Level percent open

28 years 30 years

Five-year smoothed Market Market value of assets

7.50% 7.5%-8.00%

3.25% 3.50%

4.00%

5.00% - 7.50% 5.00% - 7.50%

9,890$ 130,455$ 13,152$ 107,656$

12,812 137,534 7,226 119,701

(13,765) (147,767) (5,293) (81,770)

8,937 120,222 15,085 145,587

10,382 135,940 14,882 169,105

(1,445) (15,718) 203 (23,518)

170,827 1,833,788 96,351 1,495,738

169,382$ 1,818,070$ 96,554$ 1,472,220$

116.2% 113.1% 98.7% 116.2%

27,057$ 276,191$ 17,935$ 197,693$

54% 60% 133% 83%

170,827$ 1,833,788$ 96,351$ 1,495,738$

32,789$ 346,385$ 28,497$ 224,115$

51.3% 47.7% 90.1% 74.9%

158,263$ 1,724,207$ 102,290$ 1,461,619$

3.25%

4.00%

5.0% - 7.50%

Entry age

Kentucky Employees'

Retirement

System

June 30, 2015

Level percent closed

28 years

Five-year smoothed Market

7.50%


108

Schedule of Funding Progress - Insurance Funds

Actuarial Unfunded UAAL as a

Actuarial Accrued (Overfunded) Percentage

Actuarial Value of Liability AAL Funded Covered of Covered

Valuation Assets (AAL) (UAAL) Ratio Payroll Payroll

Date (a) (b) (b-a) (a/b) (c) ((b-a)/c)

Judicial Retirement Plan

June 30, 2013 46,552,166$ 53,732,181$ 7,180,015$ 86.6 32,930,076$ 21.8

June 30, 2014 53,374,356 56,161,700 2,787,344 95.0 32,930,076 8.5

June 30, 2015 61,046,752 61,195,047 148,295 99.8 30,009,326 .5

Legislators' Retirement Plan

June 30, 2013 25,907,629$ 23,363,734$ (2,543,895)$ 110.9 4,987,823$ (51.0)

June 30, 2014 29,405,073 24,525,907 (4,879,166) 119.9 4,987,823 (97.8)

June 30, 2015 33,194,900 26,955,434 (6,239,466) 123.1 4,467,419 (139.7)


June 30, 2013 136,321,060$ 222,326,743$ 86,005,683$ 61.3 45,256,202$ 190.0

June 30, 2014 155,594,760 234,271,127 78,676,367 66.4 44,616,885 176.3

June 30, 2015* 167,774,940 254,838,710 87,063,770 65.8 45,764,515 190.2


Non-Hazardous

June 30, 2013 497,584,327$ 2,128,754,134$ 1,631,169,807$ 23.4 1,644,408,698$ 99.2

June 30, 2014 621,236,646 2,226,759,925 1,605,523,279 27.9 1,577,496,447 101.8

June 30, 2015* 695,018,262 2,413,705,252 1,718,686,990 28.8 1,544,234,409 111.3

Hazardous

June 30, 2013 370,774,403$ 385,517,675$ 14,743,272$ 96.2 132,015,368$ 11.2

June 30, 2014 419,395,867 396,986,820 (22,409,047) 105.6 129,076,038 (17.4)

June 30, 2015* 451,514,191 374,904,234 (76,609,957) 120.4 128,680,130 (59.5)


June 30, 2013 507,048,000$ 3,615,398,000$ 3,108,350,000$ 14.0 3,480,066,000$ 89.3

June 30, 2014 605,043,000 3,292,043,000 2,687,000,000 18.4 3,486,327,000 77.1

June 30, 2015 735,025,000 3,624,323,000 2,889,298,000 20.3 3,515,113,000 82.2

* Discount rate changed from 7.75% to 7.50%


109

Three year trend for contributions - Insurance Funds

(Expressed in thousands):

Annual

Required Percentage

Contribution Contributed

Judicial Retirement Plan

2013 893$ 68.3%

2014 893 71.0%

2015 1,274 100.0%

Legislators' Retirement Plan

2013

2014

2015


2013 27,234$ 61.8%

2014 20,879 69.4%

2015 9,890 105.0%


Non-Hazardous

2013 286,143$ 57.8%

2014 208,881 79.8%

2015 130,455 104.2%

Hazardous

2013 26,253$ 97.8%

2014 15,627 152.8%

2015 13,152 113.2%


2013 188,466$ 92.9%

2014 160,628 101.9%

2015 107,656 157.7%

Insurance


110

Note 10 Note 9

EMPLOYEE BENEFIT PLAN

Kentucky Public Employees’ Deferred Compensation PlanEmployees of the Commonwealth, its cities, counties, and local school districts are eligible to participate in two deferred compen-sation plans as authorized by the United States Internal Revenue Code. These plans, labeled 457 and 401(k), after sections of the Code, are administered by the Personnel Cabinet and an indepen-dent Plan administrator. The Commonwealth, through a board of trustees as defined in KRS 18A.245, selects the administrator to oversee the daily operations and technical compliance of the Plans with applicable sections of the Internal Revenue Code. The Commonwealth’s responsibilities consist of withholding payroll deductions for its employees, collecting employee withholdings of the cities, counties, and local school districts, and remitting those withholdings to the plan administrators holding fixed and variable annuity contracts (carriers). Both Plans permit employees to defer collecting a portion of their salary until future years. This defer-ment is not available to employees until termination, retirement, death, or unforeseeable emergency. Assets of the 457 Plan and the 401(k) Plan are reported in a Pension Trust Fund within the fiduciary fund type, in compliance with Internal Revenue Code and GASB 32 requirements.

Of the $933,261,820 in the 457 Plan at June 30, 2015, $437,353,061 was applicable to the Commonwealth, while the remaining $495,908,759 represents assets of the other jurisdictions participating in the Plan. The 401(k) Plan had total plan assets of $1,688,038,086 at June 30, 2015, of which $612,287,658 was applicable to the Com-monwealth, while the remaining $1,075,750,428 represents other participating jurisdictions.

LEASE OBLIGATIONS

The Commonwealth has entered into various leases for buildings and equipment. Generally, leases contain termination clauses pro-viding for cancellation after a 30, 60, or 90 days written notice. In addition, certain leases contain appropriation clauses indicating that continuation of the lease is subject to funding by the General Assembly. It is expected that in the normal course of business most of these leases will be replaced by similar leases.

A portion of the capital lease liability for the major component units is applicable to leases with the Commonwealth.

Changes in leases payable for the year ended June 30, 2015, are summarized in Note 15, Long-Term Obligations.


111

Note 11

RISK MANAGEMENT

The Commonwealth is exposed to various risks of loss related to torts: theft, damage, and destruction of assets; errors and omissions; injuries to employees; and natural disasters. The Commonwealth utilizes the Risk Management Fund to account for these activities.

Fire and Tornado Insurance:The Fire and Tornado Insurance Program is established to account for and finance its uninsured risk of loss arising from damages to State buildings and personal property. Under this program, cov-erage is provided for up to a maximum of $500,000 per occur-rence of loss for each insured subject of risk. The Fire and Tornado Insurance Program purchases reinsurance for claims in excess of coverage provided by the Program. Settled claims have not ex-ceeded commercial coverage in any of the past three fiscal years.

The claims liability of $9,572,000 reported in the Program at June 30, 2015, is based on the requirements of GASB 10, which requires that a liability for claims be reported if information prior to the issu-ance of the financial statements indicates that it is probable that a lia-

bility has been incurred at the date of the financial statements and the amount of the loss can be reasonably estimated. Changes in the Pro-gram’s claims liability amount in Fiscal Years 2015 and 2014 were:

Self-Insured Workers’ Compensation:The Workers’ Compensation Program is self-insurance for the ben-efit of the Commonwealth’s employees, and others as described in KRS 18A.370. Losses payable by the Program include medical claims and loss of wages as a result of an employment related in-jury. Premiums are established based upon estimated claims and administrative cost for the coming fiscal year. The Program car-ries reinsurance coverage for large individual or incident claims between $5,000,000 and $20,000,000.

At June 30, 2015, capitalized leases included Buildingsand Equipment as follows (Expressed in Thousands):

Primary GovernmentBuildings and Equipment acquired through capitalleases are recorded at the lesser of fair market valueor present value of future minimum lease payments. Activities

Buildings $ 52,029 $ 14,611 $ 485,683Equipment 61,166 679 125,794Other 75,513

Total 113,195 15,290 686,990Less: Accumulated depreciation (32,499) (8,554) (280,013)

Total Net of Depreciation $ 80,696 $ 6,736 $ 406,977

Future minimum rental commitments for capitalizable leases as ofJune 30, 2015, are as follows (Expressed in Thousands):

Primary Government

Interest Interest2016 $ 16,510 $ 2,139 $ 1,073 $ 323 $ 43,801 $ 6,880 2017 13,707 1,675 1,080 294 35,390 6,270 2018 11,205 1,236 1,110 264 31,948 4,875 2019 8,245 868 1,138 235 19,778 3,927 2020 3,981 452 1,145 204 16,129 3,437 2021-2025 13,534 2,268 4,895 577 57,778 13,288 2026-2030 4,310 196 1,821 56 15,745 1,350 2031-2035 1,200 1,263 Present value of future minimum

lease payments $ 71,492 $ 8,834 $ 12,262 $ 1,953 $ 221,769 $ 41,290

Component Units - Major

Governmental Business-TypeActivities

Component Units-Major

GovernmentalPrincipal Principal Principal

Business-Type Interest

Fiscal Year 2015 Fiscal Year 2014

$ 4,720,620 $ 10,465,735

16,396,225 17,718,658

Changes in estimates

(11,544,845) (23,463,773)

Balance at Fiscal Year End $ 9,572,000 $ 4,720,620

Beginning of fiscal year liability

Incurred claims

Claims payments


112

Note 12

RISK POOLS

The Commonwealth's risk pools are the Insurance Administra-tion Fund (enterprise fund) and the Grain Insurance Corporation (component unit). The Insurance Administration Fund includes the operations of five risk pools as follows: Workers' Compensa-tion Insurance, Coal Workers Pneumoconiosis, Petroleum Storage Tank Assurance, Bond Pool, and Mine Subsidence Insurance. The Insurance Administration Corporation is reported as part of the primary government. The Grain Insurance Corporation is a risk pool reported as a discrete component unit.

Risk Pools - Enterprise FundsWorkers’ Compensation Insurance:The Kentucky Workers’ Compensation Insurance Program, a risk sharing pool, covers preexisting conditions to protect employers from having to pay for injuries not sustained while under their employment, or more than once for disabilities resulting from the same accident. This Program encourages reemployment of injured workers at adequate wages by relieving the employer of the re-quirement of paying disability compensation in addition to full wages. The Program also covers claims against uninsured em-ployers.

The Program establishes claims liabilities based on estimates of the ultimate cost of claims (including future claim adjustment expenses) that have been reported but not settled, and of claims that have been incurred but not reported. The claims liability of $739,431,744, as reported in the financial statements, is the pres-ent value of the aggregate actuarially determined claims liability of $977,431,000, discounted at 2.7 percent, and net of the esti-mated realizable value of reimbursements. The claims adjusted li-ability of $26,349,203, as reported in the financial statements is the present value of the aggregate actuarially determined liability of $30,910,000, discounted at 2.7 percent and net of the estimated realizable value of reimbursements. The actuarially determined liabilities described above arise from projections included in a biennial actuarial report that was per-formed as of June 30, 2015. Changes in the Program’s aggregate liabilities for claims and claims adjustment for the past two years were:

The actuarially determined aggregate claims liability of $176,883,414 reported in the Program at June 30, 2015, includes both reported and unreported insured events, including estimates of future payments of losses and related claims’ adjustments. Changes in the Program’s claims liability amount in Fiscal Years 2015 and 2014 were:

Transportation Cabinet Workers' Compensation:The Transportation Cabinet’s Self-Insured Workers’ Compensation Trust Program (the “Program”) was organized on July 1, 1963, as a self-insurance fund administered by the Transportation Cabinet of the Commonwealth of Kentucky (the “Cabinet”). The purpose of the Program is to provide workers’ compensation insurance to the employees of the Cabinet. The losses incurred by the Program are serviced by a designated third-party administrator who processes and reports all claims to the program.

The claims liability of $29,005,422 reported in the Program at June 30, 2015, includes both reported and unreported insured events, including estimates of both future payments of losses and related claims adjustments expenses. Changes in the Program’s claims liability amount in Fiscal Years 2015 and 2014 were:


$ 1,092,540,000 $ 1,159,021,000

6,204,000 7,293,000

Changes in estimates (29,008,000) (9,827,000)

(61,395,000) (63,947,000)

Balance at Fiscal Year End $ 1,008,341,000 $ 1,092,540,000

Claims and claims adjustment payments


Claims and claims adjustments incurred

Beginning of fiscal year liability $ 28,711,821 $ 28,088,590

3,648,294 4,336,572

Changes in estimates (390,765)

(3,354,693) (3,322,576)





$ 175,694,730 $ 173,408,609

Current year 24,846,571 25,619,119 Increase (Decrease) in Prior year (2,421,815) (1,458,433)Total Claims and Claims

Adjustments Incurred 22,424,756 24,160,686

Current year (6,220,653) (7,313,960) Increase (Decrease) in Prior year (15,015,419) (14,560,605)Total Claims and Claims

Adjustment Payments (21,236,072) (21,874,565)


Claims and claims adjustment payments:

Fiscal Year 2015 Fiscal Year 2014Beginning of fiscal year liability

Claims and claims adjustments incurred:


113

Petroleum Storage Tank Environmental Assurance Program:The Office of the Petroleum Storage Tank Environmental Assurance Program, a risk sharing pool, was created in the 1990 regular session of the Kentucky General Assembly. The purpose of the Program is to assist petroleum storage tank owners or operators in comply-ing with federal financial responsibility requirements relating to petroleum storage tanks and in cleaning up contamination caused by leaking tanks. A fee paid (at a rate of one and four-tenths cents per gallon) by dealers on each gallon of gasoline funds the Program and special fuels received in the Commonwealth funds the Program.

The Program insures petroleum storage tank owners or operators for cost incurred for cleanup and other corrective action required in cleaning up contamination caused by leaking petroleum storage tanks. The Program also provides coverage for third party claims against the owners or operators for damages sustained as a result of leaking storage tanks. Claims paid by the Program are subject to deductibles that are applied separately, by occurrence, for cleanup claims and third party damage claims. The deductible is set at $1,000 per occurrence for owners or operators of five or less tanks, and at $5,000 for owners or operators of six to ten tanks, and at $25,000 for owners of more than ten tanks.

The Program establishes claims liabilities based on estimates of the ultimate cost of claims (including future claim adjustment expenses) that have been reported but not settled, and of claims that have been incurred but not reported. The claims liability of $193,345,123 that was reported in the financial statements is the aggregate actuarially determined claims liability and is not discounted. Changes in the Program’s aggregate liabilities for claims and claims adjustment for the past two years were:

Kentucky Reclamation Guaranty Fund:The Kentucky Reclamation Guaranty Fund was established in 2013 to provide additional monies for the reclamation of forfeited coal mining operations where the permit specific performance bonds are insufficient for the Commonwealth to complete reclamation to program standards. Participation in the fund is mandatory for all com-panies mining coal in the Commonwealth, with certain exclusions.

Coal Workers' Pneumoconiosis Fund:The Coal Workers’ Pneumoconiosis Fund (CWPF) was created within the Labor Cabinet through the enactment of House Bill No. 1 by the December 1996 Special Session of the General Assembly. The CWPF is liable for one-half of the income benefits and retrain-ing incentive benefits for occupational pneumoconiosis resulting from exposure to coal dust created in the severance or processing of coal. The employer is liable for the remaining half.

In accordance with House Bill No. 1 from the December 1996 Special Session, the Kentucky Workers’ Compensation Funding Commission shall impose a pneumoconiosis assessment to pre-fund the liabilities of the CWPF and to finance its administration. The assessment is 3.0 percent of workers’ compensation premiums received on or after January 1, 1997, from employers engaged in the severance or processing of coal and an additional assessment of $0.025 per ton imposed upon coal severed on or after January 1, 1997. All pneumoconiosis assessments collected by the Fund-ing Commission are to be credited to a separate account within the Benefit Reserve Fund and to be transferred as necessary to pay administrative expenses and current claims of the CWPF.

The Coal Workers’ Pneumoconiosis Fund establishes claims li-ability based on estimates of the ultimate cost of claims (including future claims adjustment expenses) that have been reported but not settled, and of claims that have been incurred but not reported. The claims liability of $42,271,362, as reported in the financial state-ments, is the present value of the aggregate actuarially determined liability of $48,360,000, discounted at 3.5 percent. The claims ad-justment liability of $1,167,000, as reported in the financial state-ments, is the present value of the aggregate actuarially determined liability of $1,335,000, discounted at 3.5 percent. Changes in the aggregate liability for claims and claims adjustments for the past two years were as follows:

As stated above, the Coal Workers’ Pneumoconiosis Fund was cre-ated by the December 1996 Special Session of the General Assem-bly. Therefore, there are no provisions for claims prior to 1997.

$ 181,143,394 $ 194,025,718

5,953,264 6,054,551

Changes in estimates 23,795,409

(17,546,944) (18,936,875)







$ 34,703,000 $ 22,533,000

6,688,000 3,643,000

Changes in estimates 15,377,000 11,852,000

(7,073,000) (3,325,000)






114

On the date of the establishment of the fund, each entity (member) holding a permit will be assessed a start-up assessment of $1,500 and an assessment of $10 per active acre. Entities entering after the date of establishment of the fund shall pay a onetime assessment $10,000 to the fund. Additionally, members pay tonnage fees of $.0757 per ton of surface mined coal and $.0357 per ton for underground mined coal. All permits previously subject to the voluntary bond pool at the time of its repeal shall be excluded from the start-up assessments but will be subject to the tonnage fees. Member entities shall be given the option to provide full-cost bonds based on a reclamation cost estimate that reflects reclamation costs to the cabinet and certi-fied by a professional engineer in lieu of participation in the fund.

Permits which are used exclusively for coal preparation, processing operations, loading activities, disposal of refuse operations, coal haulage, access roads, mine maintenance areas, support facilities, and other permits are exempt to the provisions of the previous paragraph as determined by the Commission. Exempt members shall pay an annual fee of $10 per acre.

As determined by the Commission any permits, or expired permits, not subject to the above paragraphs shall pay an annual fee of $6 per surface acre to the fund. This fee shall not apply to those permits specified in KRS 350.518(2)(f).

The coal companies participating in the Program are required to post a permit specific bond based on the number of acres permitted and their rating in the Program. The Kentucky Reclamation Guaranty Fund in turn provides coverage for reclamation costs that exceed the permit specific bond. The Fund will pay claims for costs incurred in excess of the required bond amount.

The Program establishes claims liabilities based on estimates of the ultimate cost of claims (including future claim adjustment expenses) that have been reported but not settled, and of claims that have been incurred but not reported. The claims liability of $189,552 Kentucky Employees Health Plan:

Kentucky Employees Health Plan was established pursuant to KRS 18A.225, 18A.226, and 18A.227 to administrate and facilitate an employee health insurance program as part of a flexible benefits plan. The Department for Employee Insurance (the Department) is responsible for overseeing the Kentucky Employees Health Plan (KEHP).

The health benefits for governmental participants are funded by monthly premiums paid by individuals and state and local govern-mental units. A participant may extend coverage to dependents for an additional monthly premium based of the coverage requested. Premiums are collected by the Department and held in a trust fund until needed for the payment of benefits.

$ $

5,131


Balance at Fiscal Year End $ 5,131 $





$ 189,552 $ 189,552


Balance at Fiscal Year End $ 189,552 $ 189,552




Mine Subsidence Insurance:The Mine Subsidence Insurance Program is administered by the Department of Insurance. The provisions of the Program require that all insurance policies issued or renewed that insure a structure located in any county in the Commonwealth, except those specifi-cally exempted by KRS 304.44-60, shall include a separately stated premium for mine subsidence damage coverage. This premium is assessed at the amount determined by the Program, and the insurer is required to code this coverage to the Program. The insurer may refuse to provide coverage where preexisting damage is determined to exist. The Program provides coverage subject to a deductible of 2 percent of the policy’s total insured value or not less than $250 and not more than $500. The Mine Subsidence Program also limits its coverage to $50,000 per structure.

GASB 10 requires that a liability for claims be reported if informa-tion prior to the issuance of the financial statements indicates that it is probable that liability has been incurred at the date of the financial statements and the amount of the loss can be reasonably estimated. The Mine Subsidence Program had claims liability of $5,131 at June 30, 2015. Changes in the Program’s aggregate liabilities for the claims and claims adjustments for the past two years were:


115

Note 13

The Plan develops premium equivalent rates each year by utilizing historical trend information, current claims experience and national trends. An outside actuarial consultant advises the Plan Administra-tor regarding premium rates. If premium rates are changed, they become effective the beginning of a calendar year.

Plan participants are not subject to supplemental assessment in the event of a premium deficiency. At the time of premium payment, the risk of loss due to incurred benefit costs is transferred from the participant to the Plan. If assets of the Plan were to be exhausted, participants would not be responsible for the Plan’s liabilities.

All state agencies and local boards of education in the Common-wealth are required to offer to their active employees the coverage selections offered by the Plan. Local government entities may elect to participate in the Plan.

The Plan establishes liabilities for incurred but unpaid claims based on its estimate of the ultimate cost of settling claims that have been reported but not yet settled, and of claims that have been incurred but not yet reported. The claims liability $70,696,529 that was reported in the financial statements is the aggregate actuarially determined claims liability. Changes in the aggregate liabilities for claims and claims adjustment expenses for the past two years are as follows:

Grain Insurance:The Grain Insurance Program was established to promote economic stability in agriculture by providing coverage to grain producers for losses incurred in the event of a financial failure of a grain dealer or grain warehousemen. The Program is funded by a half-cent per bushel assessment on all marketed grain produced in Kentucky. The Program also has provisions that the assessment can be sus-pended when the balance of the Program reaches $3 million and if suspended will be reapplied when the balance of the Program drops to $2 million.

DEFEASANCE OF LONG-TERM DEBT

The School Facilities Construction Commission issues revenue bonds on behalf of local school districts to finance construction of new facilities or the major renovation of existing facilities. The Commission participates in the payment of debt service for quali-fying districts. By statute, the Commission’s portion of the savings from refunding issues goes to the school district. Therefore, the Commission’s participation remains unchanged and the Commis-sion does not experience an economic gain or loss on these trans-actions. Proceeds from the issues are placed in escrow accounts to pay the future debt service of the issue(s) being refunded. During the fiscal year ended June 30, 2015 the Commission issued the fol-lowing refunding revenue bonds:

Revenue refunding bonds dated March 24, 2015, were issued for the Allen County School District Finance Corporation to refund a 2004 and 2005 issue. The Commission’s portion of the refunding issue was $798,768 maturing December 1, 2015, through Decem-ber 1, 2023, and carrying an interest rate of 2.00%.

Revenue refunding bonds dated February 18, 2015, were issued for the Anderson County School District Finance Corporation to refund a 2006 issue. The Commission’s portion of the refunding issue was $622,669 maturing June 1, 2015, through December 1, 2026, and carrying interest rates of 2.000% to 2.250%.

Revenue refunding bonds dated August 6, 2014, were issued for the Ashland Independent District Finance Corporation to refund a 2009 issue. The Commission’s portion of the refunding issue was $518,180 maturing February 1, 2015, through August 1, 2029, and carrying interest rates from 1.00% to 3.125%.

Revenue refunding bonds dated February 26, 2015, were issued for the Ashland Independent District Finance Corporation to re-fund a 2006 issue. The Commission’s portion of the refunding issue was $482,980 maturing August 1, 2015, through August 1, 2026, and carrying interest rates from 2.000% to 2.150%.

$ 99,354,848 $ 102,811,050

1,460,101,994 1,585,494,571

Changes in estimates 12,103,085 7,893,093

(1,500,863,398) (1,596,843,866)





GASB 10 requires that a liability for claims be reported if informa-tion prior to the issuance of the financial statements indicates that it is probable that liability has been incurred at the date of the financial statements, and the amount of the loss can be reasonably estimated. There were no cash payments for claims expenses during 2015 or 2014; and, there was not a claims liability for FY 2015 or FY 2014.


116

Revenue refunding bonds dated March 20, 2015, were issued for the Ballard County School District Finance Corporation to refund a 2010 issue. The Commission’s portion of the refunding issue was $59,695 maturing March 1, 2016, through March 1, 2030, and carrying interest rates of 2.000% to 3.000%.

Revenue refunding bonds dated April 6, 2015, were issued for the Bardstown Independent District Finance Corporation to refund a 2010 issue. The Commission’s portion of the refunding issue was $71,205 maturing August 1, 2015, through August 1, 2030, and carrying an interest rate of 2.550%.

Revenue refunding bonds dated February 25, 2015, were issued for the Barren County School District Finance Corporation to re-fund a 2006 issue. The Commission’s portion of the refunding issue was $1,027,773 maturing August 1, 2017, through August 1, 2026, and carrying an interest rate of 5.000%.

Revenue refunding bonds dated August 4, 2014, were issued for the Beechwood Independent School District Finance Corporation to refund a 2009 issue. The Commission’s portion of the refunding issue was $868,943 maturing February 1, 2015, through August 1, 2029, and carrying interest rates from 1.650% to 3.125%.

Revenue refunding bonds dated March 18, 2015, were issued for the Boone County School District Finance Corporation to refund a 2006 issue. The Commission’s portion of the refunding issue was $663,069 maturing August 1, 2015, through August 1, 2026, and carrying interest rates of 2.000% to 3.000%.

Revenue refunding bonds dated June 25, 2015, were issued for the Bourbon County School District Finance Corporation to refund a 2005 issue. The Commission’s portion of the refunding issue was $596,749 maturing March 1, 2016, through March 1, 2020, and carrying interest rates of 1.000% to 1.550%.

Revenue refunding bonds dated November 12, 2014, were issued for the Bowling Green Independent School District Finance Cor-poration to refund a 2005 issue. The Commission’s portion of the refunding issue was $731,949 maturing June 1, 2015, through De-cember 1, 2019, and carrying interest rates from 2.00% to 4.00%

Revenue refunding bonds dated August 4, 2014, were issued for the Boyd County School District Finance Corporation to refund a 2010 issue. The Commission’s portion of the refunding issue was $3,793,055 maturing February 1, 2015, through February 1, 2031, and carrying interest rates from 2.00% to 3.50%.

Revenue refunding bonds dated April 1, 2015, were issued for the Boyle School District Finance Corporation to refund a 2007 issue. The Commission’s portion of the refunding issue was $538,122 maturing October 1, 2015, through April 1, 2027, and carrying an interest rate of 2.350%.

Revenue refunding bonds dated July 30, 2014, were issued for the Bullitt County School District Finance Corporation to refund a 2009 issue. The Commission’s portion of the refunding issue was $213,785 maturing September 1, 2014, through September 1, 2029, and carrying interest rates from 3.000% to 5.000%.

Revenue refunding bonds dated November 26, 2014, were issued for the Calloway County School District Finance Corporation to refund a 2010 issue. The Commission’s portion of the refunding issue was $48,133 maturing May 1, 2015, through May 1, 2021, and carrying interest rates from 0.900% to 2.000%.

Revenue refunding bonds dated December 11, 2014, were issued for the Campbell County School District Finance Corporation to refund a 2006 issue. The Commission’s portion of the refunding issue was $706,684 maturing February 1, 2015, through August 1, 2026, and carrying interest rates from 2.00% to 3.00%.

Revenue refunding bonds dated December 4, 2014, were issued for the Carroll County School District Finance Corporation to re-fund a 2010 issue. The Commission’s portion of the refunding issue was $959,488 maturing February 1, 2015, through February 1, 2030, and carrying interest rates from 2.50% to 3.00%.

Revenue refunding bonds dated February 20, 2015, were issued for the Carter County School District Finance Corporation to re-fund a 2006 issue. The Commission’s portion of the refunding is-sue was $1,722,784 maturing February 1, 2016, through February 1, 2026, and carrying interest rates from 2.000% to 2.250%.

Revenue refunding bonds dated March 18, 2015, were issued for the Casey County School District Finance Corporation to refund a 2006 issue. The Commission’s portion of the refunding issue was $6,060,252 maturing August 1, 2015, through August 1, 2026, and carrying interest rates from 2.000% to 2.350%.

Revenue refunding bonds dated November 10, 2014, were issued for the Covington Independent School District Finance Corpora-tion to refund a 2010 issue. The Commission’s portion of the re-funding issue was $1,725,109 maturing February 1, 2015, through February 1, 2031, and carrying interest rates from 2.000% to 3.125%.

Revenue refunding bonds dated April 10, 2015, were issued for the Covington Independent School District Finance Corporation to refund a 2005 and a 2010 issue. The Commission’s portion of the refunding issue was $772,494 maturing April 1, 2016, through April 1, 2026, and carrying interest rates from 2.000% to 3.000%.

Revenue refunding bonds dated December 4, 2014, were issued for the Danville Independent School District Finance Corporation to refund a 2006 issue. The Commission’s portion of the refunding issue was $700,000 maturing April 1, 2015, through April 1, 2026, and carrying interest rates from 1.00% to 3.00%.


117

Revenue refunding bonds dated May 20, 2015, were issued for the Dawson Springs Independent School District Finance Corporation to partially refund a 2006 issue. The Commission’s portion of the refunding issue was $1,440,000 maturing August 1, 2015, through August 1, 2026, and carrying an interest rate of 2.00%.

Revenue refunding bonds dated February 25, 2015, were issued for the Estill County School District Finance Corporation to re-fund a 2010 issue. The Commission’s portion of the refunding is-sue was $1,275,151 maturing September 1, 2015, through Septem-ber 1, 2030, and carrying interest rates from 2.000% to 3.000%.

Revenue refunding bonds dated October 22, 2014, were issued for the Fairview Independent School District Finance Corporation to refund a 2005 issue. The Commission’s portion of the refunding issue was $395,510 maturing February 1, 2015, through August 1, 2025, and carrying interest rates from 1.000% to 2.150%.

Revenue refunding bonds dated December 29, 2014, were issued for the Floyd County School District Finance Corporation to re-fund a 2006 issue. The Commission’s portion of the refunding issue was $4,664,282 maturing March 1, 2015, through March 1, 2026, and carrying interest rates from 2.000% to 3.000%.

Revenue refunding bonds dated August 21, 2014, were issued for the Fort Thomas Independent School District Finance Corporation to refund a 2009 issue. The Commission’s portion of the refunding issue was $6,309,446 maturing February 1, 2015, through August 1, 2029, and carrying interest rates from 2.000% to 3.375%.

Revenue refunding bonds dated April 2, 2015, were issued for the Fort Thomas Independent School District Finance Corporation to refund a 2006 issue. The Commission’s portion of the refund-ing issue was $1,242,616 maturing April 1, 2016, through April 1, 2026, and carrying interest rates from 2.000% to 3.000%.

Revenue refunding bonds dated September 11, 2014, were issued for the Frankfort Independent School District Finance Corporation to refund a 2006 issue. The Commission’s portion of the refunding issue was $447,357 maturing February 1, 2015, through August 1, 2026, and carrying interest rates from 1.000% to 3.000%.

Revenue refunding bonds dated March 30, 2015, were issued for the Gallatin County School District Finance Corporation to refund a 2006 issue. The Commission’s portion of the refunding issue was $6,211,420 maturing May 1, 2015, through May 1, 2026, and carrying interest rates from 2.000% to 3.000%.

Revenue refunding bonds dated April 15, 2015, were issued for the Garrard County School District Finance Corporation to refund a 2004 issue and a 2007 issue. The Commission’s portion of the refunding issue was $266,975 maturing June 1, 2015, through December 1, 2027, and carrying interest rates from 2.000% to 2.500%.

Revenue refunding bonds dated April 17, 2015, were issued for the Grant County School District Finance Corporation to refund a 2010 issue. The Commission’s portion of the refunding issue was $1,963,567 maturing August 1, 2015, through August 1, 2030, and carrying interest rates from 2.000% to 3.125%.

Revenue refunding bonds dated March 3, 2015, were issued for the Graves County School District Finance Corporation to refund a 2006 issue. The Commission’s portion of the refunding issue was $479,074 maturing March 1, 2016, through March 1, 2026, and carrying an interest rate of 2.000%.

Revenue refunding bonds dated March 12, 2015, were issued for the Green County School District Finance Corporation to refund a 2007 issue. The Commission’s portion of the refunding issue was $4,270,717 maturing August 1, 2015, through August 1, 2027, and carrying interest rates from 2.000% to 2.375%.

Revenue refunding bonds dated November 12, 2014, were issued for the Hardin County School District Finance Corporation to re-fund a 2006 issue. The Commission’s portion of the refunding issue was $907,616 maturing May 1, 2015, through May 1, 2026, and carrying interest rates from 2.000% to 5.000%.

Revenue refunding bonds dated March 31, 2015, were issued for the Hardin County School District Finance Corporation to refund a 2005 issue. The Commission’s portion of the refunding issue was $691,559 maturing February 1, 2016, through February 1, 2020, and carrying interest rates from 3.000% to 4.000%.

Revenue refunding bonds dated March 19, 2015, were issued for the Hardin County School District Finance Corporation to refund a 2005 issue and a 2007 issue. The Commission’s portion of the refunding issue was $918,772 maturing June 1, 2015, through June 1, 2027, and carrying interest rates from 2.000% to 4.000%.

Revenue refunding bonds dated February 24, 2015, were issued for the Harlan County School District Finance Corporation to re-fund a 2006 issue. The Commission’s portion of the refunding issue was $12,709,970 maturing August 1, 2015, through August 1, 2026, and carrying interest rates from 2.000% to 3.000%.

Revenue refunding bonds dated December 1, 2014, were issued for the Henderson County School District Finance Corporation to refund a 2010 issue. The Commission’s portion of the refunding issue was $1,697,734 maturing June 1, 2015, through December 1, 2030, and carrying interest rates from 0.900% to 3.000%.

Revenue refunding bonds dated July 15, 2014, were issued for the Henry County School District Finance Corporation to refund a 2010 issue. The Commission’s portion of the refunding issue was $706,420 maturing April 1, 2015, through April 1, 2030, and car-rying interest rates from 1.100% to 4.000%.


118

Revenue refunding bonds dated November 5, 2014, were issued for the Jackson County School District Finance Corporation to re-fund a 2009 issue. The Commission’s portion of the refunding issue was $5,656,472 maturing May 1, 2015, through November 1, 2029, and carrying interest rates from 1.250% to 3.000%.

Revenue refunding bonds dated September 2, 2014, were issued for the Jefferson County School District Finance Corporation to refund a 2006 issue. The Commission’s portion of the refunding issue was $8,291,139 maturing October 1, 2015, through October 1, 2020, and carrying interest rates from 2.000% to 5.000%.

Revenue refunding bonds dated December 9, 2014, were issued for the Jessamine County School District Finance Corporation to refund a 2005 issue. The Commission’s portion of the refunding issue was $43,352 maturing February 1, 2015, through February 1, 2016, and carrying interest rates from 1.00% to 3.00%.

Revenue refunding bonds dated April 1, 2015, were issued for the Kenton County School District Finance Corporation to refund 2006 issues. The Commission’s portion of the refunding issue was $2,217,630 maturing October 1, 2015, through October 1, 2026, and carrying interest rates from 2.000% to 3.000%.

Revenue refunding bonds dated September 25, 2014, were issued for the Knott County School District Finance Corporation to re-fund a 2003 issue. The Commission’s portion of the refunding issue was $280,700 maturing March 1, 2015, through September 1, 2023, and carrying an interest rate of 2.000%.

Revenue refunding bonds dated March 19, 2015, were issued for the Laurel County School District Finance Corporation to refund a 2006 issue. The Commission’s portion of the refunding issue was $1,058,144 maturing August 1, 2015, through August 1, 2026, and carrying interest rates of 3.000% to 4.000%.

Revenue refunding bonds dated March 4, 2015, were issued for the Letcher County School District Finance Corporation to refund a 2005 issue. The Commission’s portion of the refunding issue was $520,365 maturing June 1, 2015, through June 1, 2025, and carry-ing interest rates of 2.000% to 3.000%.

Revenue refunding bonds dated March 13, 2015, were issued for the Letcher County School District Finance Corporation to refund a 2010 issue. The Commission’s portion of the refunding issue was $3,597,375 maturing August 1, 2015, through August 1, 2030, and carrying interest rates of 2.000% to 3.000%.

Revenue refunding bonds dated February 19, 2015, were issued for the Lewis County School District Finance Corporation to re-fund a 2005 issue. The Commission’s portion of the refunding issue was $631,264 maturing August 1, 2015, through August 1, 2025, and carrying interest rates of 2.000% to 2.500%.

Revenue refunding bonds dated February 2, 2015, were issued for the Magoffin County School District Finance Corporation to re-fund a 2006 issue. The Commission’s portion of the refunding issue was $4,848,225 maturing August 1, 2015, through August 1, 2026, and carrying interest rates of 2.000% to 2.500%.

Revenue refunding bonds dated March 26, 2015, were issued for the McLean County School District Finance Corporation to refund a 2005 and a 2006 issue. The Commission’s portion of the refund-ing issue was $834,275 maturing August 1, 2015, through August 1, 2026, and carrying interest rates from 2.000% to 2.500%.

Revenue refunding bonds dated August 7, 2014, were issued for the Mercer County School District Finance Corporation to refund a 2010 issue. The Commission’s portion of the refunding issue was $139,138 maturing February 1, 2015, through August 1, 2030, and carrying interest rates from 1.750% to 3.500%.

Revenue refunding bonds dated March 20, 2015, were issued for the Metcalfe County School District Finance Corporation to re-fund a 2003 and a 2010 issue. The Commission’s portion of the refunding issue was $2,735,443 maturing June 1, 2015, through December 1, 2030, and carrying interest rates from 2.000% to 3.000%.

Revenue refunding bonds dated April 21, 2015, were issued for the Middlesboro Independent School District Finance Corporation to refund a 2004 and a 2006 issue. The Commission’s portion of the refunding issue was $581,032 maturing August 1, 2015, through August 1, 2026, and carrying interest rates from 1.000% to 2.300%.

Revenue refunding bonds dated February 26, 2015, were issued for the Nelson County School District Finance Corporation to re-fund a 2010 issue. The Commission’s portion of the refunding issue was $1,621,137 maturing June 1, 2015, through December 1, 2030, and carrying interest rates from 2.000% to 3.000%.

Revenue refunding bonds dated March 2, 2015, were issued for the Nelson County School District Finance Corporation to refund a 2005 issue. The Commission’s portion of the refunding issue was $1,613,921 maturing September 1, 2015, through September 1, 2025, and carrying interest rates from 2.000% to 2.250%.

Revenue refunding bonds dated February 2, 2015, were issued for the Pendleton County School District Finance Corporation to re-fund a 2007 issue. The Commission’s portion of the refunding issue was $667,381 maturing February 1, 2016, through February 1, 2027, and carrying interest rates from 2.000% to 2.500%.

Revenue refunding bonds dated August 5, 2014, were issued for the Perry County School District Finance Corporation to refund a 2001 issue. The Commission’s portion of the refunding issue was $13,039 maturing March 1, 2015, and carrying an interest rate of 1.00%.


119

Revenue refunding bonds dated December 17, 2014, were issued for the Pineville Independent School District Finance Corporation to refund a 2010 issue. The Commission’s portion of the refund-ing issue was $398,304 maturing March 1, 2015, through March 1, 2030, and carrying interest rates from 2.000% to 3.250%.

Revenue refunding bonds dated March 16, 2015, were issued for the Powell County School District Finance Corporation to refund a 2006 issue. The Commission’s portion of the refunding issue was $1,169,466 maturing August 1, 2015, through August 1, 2026, and carrying interest rates of 2.000% to 2.400%.

Revenue refunding bonds dated February 25, 2015, were issued for the Raceland-Worthington Independent School District Finance Corporation to refund a 2005 issue. The Commission’s portion of the refunding issue was $393,669 maturing June 1, 2015, through June 1, 2025, and carrying interest rates from 1.000% to 2.250%.

Revenue refunding bonds dated February 4, 2015, were issued for the Rockcastle County School District Finance Corporation to re-fund a 2006 issue. The Commission’s portion of the refunding issue was $449,863 maturing August 1, 2015, through August 1, 2026, and carrying interest rates of 1.00% to 2.250%.

Revenue refunding bonds dated March 5, 2015, were issued for the Simpson County School District Finance Corporation to refund a 2006 issue. The Commission’s portion of the refunding issue was $2,741,693 maturing August 1, 2015, through August 1, 2026, and carrying interest rates of 2.000% to 2.250%.

Revenue refunding bonds dated December 17, 2014, were issued for the Todd County School District Finance Corporation to refund a 2010 issue. The Commission’s portion of the refunding issue was $365,116 maturing February 1, 2015, through August 1, 2030, and carrying interest rates of 2.000% to 3.000%.

Revenue refunding bonds dated March 11, 2015, were issued for the Walton Verona Independent School District Finance Corpora-tion to refund a 2006 issue. The Commission’s portion of the re-funding issue was $876,398 maturing August 1, 2015, through Au-gust 1, 2026, and carrying interest rates from 2.000% to 2.500%.

Revenue refunding bonds dated April 22, 2015, were issued for the Warren County School District Finance Corporation to refund a 2006 issue. The Commission’s portion of the refunding issue was $282,702 maturing February 1, 2016, through February 1, 2026, and carrying interest rates of 2.000% to 3.000%.

Revenue refunding bonds dated May 8, 2015, were issued for the Warren County School District Finance Corporation to refund a 2010 issue. The Commission’s portion of the refunding issue was $2,118,916 maturing August 1, 2015, through August 1, 2030, and carrying interest rates of 2.000% to 3.125%.

Revenue refunding bonds dated January 6, 2015, were issued for the Wayne County School District Finance Corporation to refund a 2006 issue. The Commission’s portion of the refunding issue was $1,525,810 maturing April 1, 2015, through April 1, 2026, and carrying interest rates of 2.000% to 2.500%.

Revenue refunding bonds dated January 6, 2015, were issued for the Whitley County School District Finance Corporation to refund a 2006 issue. The Commission’s portion of the refunding issue was $3,181,817 maturing June 1, 2015, through June 1, 2026, and carrying interest rates of 2.000% to 2.500%.

Revenue refunding bonds dated March 17, 2015, were issued for the Williamstown Independent School District Finance Corpo-ration to refund a 2006 issue. The Commission’s portion of the refunding issue was $198,297 maturing March 1, 2016, through March 1, 2026, and carrying interest rates from 1.000% to 2.500%.

State Property and Buildings Commission

The State Property and Buildings Commission issued the follow-ing Revenue Refunding Bonds:

$254,380,000 of Revenue Refunding Bonds, Project 108 Series B dated February 11, 2015, were issued. The refunding bonds mature August 1, 2015 through August 1, 2026 carrying interest rates of 2.00% to 5.00%. The net proceeds of the issue in the amount of $304,417,528 were deposited in Bond Repayment Fund to par-tially refund State Property and Buildings Commission issues of bonds. The bonds partially refunded consisted of State Property and Building Commission project number 85 in the amount of $13,245,000 maturing August 1, 2016 through August 1, 2025 carrying interest rates from 3.80% to 5.00% ; project number 87 in the amount of $139,305,000 maturing March 1, 2018 through March 1, 2027 carrying interest rates from 4.00% to 5.00%; proj-ect number 88 in the amount of $74,965,000 maturing Novem-ber 1, 2019 through November 1, 2024 carrying an interest rate of 5.00% and Kentucky Asset/Liability Commission Project Notes titled 2005 General Fund First Series in the amount of $50,060,000 maturing May 1, 2016 through May 1, 2025 carrying interest rates of 4.125% to 5.000%. The refunding will result in increase cash flows in future periods of $32,901,116 and a present value savings of $32,904,388 at 2.12%. Component Units

Morehead State University issued $27,460,000 of General Re-ceipts Refunding Bonds as follows:

$22,620,000 of Series A serial bonds dated July 24, 2014 maturing on October 1, 2014 through October 1, 2028 carrying interest rates of 2.00% to 5.00% and $4,840,000 Series B serial bonds maturing on October 1, 2014 through October 1, 2029 carrying interest rates


120

of 1.00% to 5.00%. These 2014 Series A and B Bonds maturing on or after October 1, 2024 shall be subject to optional redemp-tion, in whole or in part, prior to their maturity at the option of the University on any date on or after April 1, 2024. The net proceeds of the issue in the amount of $30,028,417 was deposited to various Debt Service Funds will be used to refund the University’s out-standing debt as follows: Morehead State University Consolidated Educational Buildings Refunding and Improvement Bonds, Series M, term bonds in the amount of $495,000 maturing May 1, 2019 and May 1, 2024 carrying interest rates of 4.125% and 4.500% re-spectively, Morehead State University General Receipts, Taxable Build America Bonds 2009 Series A in the amount of $24,125,000 maturing November 1, 2014 through November 1, 2028 carrying interest rates of 4.00% to 6.00% and Morehead State University General Receipts Taxable Build America Bonds 2010 Series A, consisting of serial bonds in the amount of $1,600,000 maturing November 1, 2014 through November 1, 2019 carrying inter-est rates of 2.760% to 4.200% and term bonds in the amount of $3,430,000 maturing November 1, 2021, November 1, 2023, No-vember 1, 2025, November 1, 2027, November 1, 2029 and carry-ing interest rates of 4.600%, 4.800%, 5.200%, 5.600% and 5.750% respectively. The refunding associated with Series 2014A will re-sult in increase cash flows in future periods of $1,874,847 and a present value savings of $1,812,686 at 2.62%. The refunding as-sociated with Series 2014B will result in increase cash flows in fu-ture periods of $184,898 and a present value savings of $188,326 at 2.79%.

The University of Kentucky issued $205,280,000 of General Re-ceipts Revenue Refunding Bonds as follows:

$88,145,000 of General Receipts Revenue Refunding Bonds Se-ries 2014 D dated uly 28, 2014. These bonds mature October 1, 2014 Through October 1, 2025 and carry interest rates of 3.00% to 5.25%. These 2014 Series D Bonds maturing on or after Octo-ber 1, 2024 shall be subject to optional redemption, in whole or in part, prior to their maturity at the option of the University on any date on or after October 1, 2023. The net proceeds of the is-sue in the amount of $107,547,919 was deposited to various Debt Service and Escrow Funds and will completely refund Con Ed, Series P, Q, R (2nd) in the amount of $24,970,000 maturing May 1, 2015 through May 1, 2021 carrying interest rates of 4.00% to 4.50%; partially refund General Receipts Series 2005 A bonds in the amount of $4,270,000 maturing October 1, 2016 through October 1, 2025 carrying interest rates of 4.000% to 4.375% and Series 2005A ALCO notes in the amount of $72,865,000 maturing October 1, 2016 through October 1, 2025 carrying interest rates of 4.125% to 5.000%. The refunding associated with the refunding of Con Ed, Series P, Q; R (2nd) will result in increase cash flows in future periods of $6,622,115 and a net present value savings of $1,266,763 at 1.97%. The refunding associated with Series 2014 D will result in increase cash flows in future periods of $15,014,059 and a present value savings of $9,658,706 at 1.97%.

$117,135,000 of General Receipts Revenue Refunding Bonds dated April 15, 2015. These bonds consist of: $97,440,000 Series B serial bonds maturing October 1, 2018 through October 1, 2027 carrying an interest rate of 5.00% and $19,695,000 Series C serial bonds maturing October 1, 2015 through October 1, 2026 carry-ing interest rates of 2.00% to 4.00%. These 2015 Series B and C Bonds maturing on or after October 1, 2025 shall be subject to optional redemption, in whole or in part, prior to their maturity at the option of the University on any date on or after April 1, 2025. The net proceeds of the 2015 Series B and C Bond Issues in the amount of $140,240,673 was deposited to various Debt Service and Escrow Funds and will partially refund ALCO 2007 Series A – UK General Receipts Series in the amount of $51,655,000 maturing October 1, 2018 through October 1, 2027 carrying an interest rate of 5.00% with a call date of October 1, 2017, partially refund ALCO 2007 Series B – UK General Receipts Series in the amount of $55,780,000 maturing October 1, 2019 through October 1, 2027 carrying interest rates of 4.125% to 5.000% with a call date of October 1, 2017, completely refund Con Ed Series U in the amount of $6,900,000 maturing May 1, 2016 through May 1, 2025 carrying an interest rate of 4.00% and partially refund 2006 Series A – UK General Receipts Series in the amount of $14,765,000 maturing October 1, 2017 through October 1, 2026 carrying in-terest rates of 4.375% to 4.500%. The refunding associated with Series 2015B will result in increase cash flows in future periods of $12,036,201 and a present value savings of $12,037,957 at 2.10%. The refunding associated with Series 2015C will result in increase cash flows in future periods of $2,863,519 and a present value sav-ings of $2,012,106 at 1.87%.

The Kentucky Infrastructure Authority issued Wastewater and Drinking Water Revolving Fund Revenue Refunding Bonds, Se-ries 2015A dated May 21, 2015 in the amount of $64,465,000. The bonds mature February 1, 2016 through February 1, 2026 carry-ing interest rates of 2.000% to 5.000%. The net proceeds of the issue were $78,158,000 with a cost of issuance of $497,000. The net proceeds were deposited with the trustee and used for the par-tially refunding of Series 2010A bonds maturing February 1, 2016 through February 1, 2020 with an interest rate of 5.00%. The eco-nomic gain from this refunding transaction is calculated as the dif-ference between the present value of the debt service requirements of the refunded Series 2010A and the present value of the Series 2015A debt service requirements, discounted at the effective rate of the Series 2015A Bonds. The economic gain on the advance refunding is $2,763,000.


121

Note 14

RELATED ORGANIZATIONS

The Commonwealth has several related organizations. The finan-cial activities of these organizations are not included in the Com-monwealth's financial statements. They are the East Kentucky Corporation, Eastern Kentucky Exposition Center Corporation, Northern Kentucky Convention Center Corporation, Kentucky Employer’s Mutual Insurance Authority, Kentucky Wood Prod-ucts Competitiveness Corporation, Commonwealth Seed Capital, LLC and the Interstate Air Pollution Control Commission. The Commonwealth holds no economic interest in, nor has any finan-cial responsibility for these organizations.

Note 15

LONG-TERM OBLIGATIONS

Long-Term Obligations

General Obligation Bonds are issued through the State Property and Buildings Commission, subject to general referendum ap-proval required by the Kentucky Constitution. General obligation bonds pledge the full faith, credit, and taxing power of the Com-monwealth and denote application of specific or general tax rev-enues to provide payment of principal and interest requirements on the debt. No new issues of this type have been issued since 1965, and none are outstanding or authorized but unissued at June 30, 2015.

Revenue Bonds - General authorization for the use of revenue bonds is contained in Chapter 58 of the Kentucky Revised Statutes. Specific authority is contained in the legislation and related KRS chapters creating and empowering the various debt issuing enti-ties. Reference to such legislation and laws is made throughout the following entity descriptions. Effective July 15, 1980, KRS 56.870 requires prior approval of debt financing projects by the Kentucky General Assembly sitting in regular or special sessions. Succeeding statutes establish the methods for this approval and the exemptions from it. The majority of new debt issues are approved through the appropriation act. Per KRS 56.873, effective July 15, 1980, revenue bonds having passed the above mechanisms, and not requiring Commonwealth appropriations, must receive an “A” rating by Moody’s Investors Service or the equivalent rating by another qualified rating agency prior to their sale.

Project revenue debt pledges only the revenues produced by the project so funded as security for repayment and does not directly obligate the Commonwealth. Kentucky’s project revenue debt may be further classified by the purpose of the debt. Revenue

debt issued by the Kentucky Housing Corporation, Kentucky In-frastructure Authority, Kentucky Higher Education Student Loan Corporation, Kentucky Economic Development Finance Author-ity, Kentucky Local Correctional Facilities Construction Author-ity, Kentucky Agricultural Finance Corporation, and Kentucky School Facilities Construction Commission is used as a financing mechanism for activities and facilities not used directly for State purposes. The tax-exempt status of such municipal debt, whether issued by State or local governments, is used to provide financ-ing for entities unable to bear the costs of private financing when the General Assembly deems such entities worthy of public assis-tance. The other category of revenue debt finances facilities used directly by State Government in activities such as roads, parks, office buildings, and educational facilities. The primary distinc-tion between these categories is that the first type, with the excep-tions of the Kentucky School Facilities Construction Commission, which succeeds the Kentucky School Building Authority, and the Kentucky Infrastructure Authority, which succeeds the Kentucky Pollution Abatement and Water Resources Finance Authority, re-quires no State funds of any type to provide debt service, principal and interest payments on the debt. The School Facilities Construc-tion Commission supplements funds provided by local govern-ments and school boards in varying percentages for debt service. The Kentucky Infrastructure Authority may accept appropriations made by the General Assembly, in addition to State and Federal grants, related to the purposes for which it was created. This dis-tinction is important in analyzing the true level of State debt and the burden of that debt on State resources.

During the fiscal year ended June 30, 2015 the debt issuing enti-ties described below sold revenue and revenue refunding bonds as follows:

The Kentucky State Property and Buildings Commission is an independent agency of the Commonwealth created by KRS 56.450 and empowered upon application of any State agency to issue bonds in its own name to pay the costs of acquiring land and equipment, and the construction and equipping of buildings for the occupancy and/or use of said agencies.

The Commission issued $384,000,000 in revenue and revenue re-funding bonds as follows:

$384,000,000 Project No. 108, Revenue and Revenue Refunding Bonds, dated February 11, 2015, were issued. These bonds consist of: $129,620,000 Series A serial bonds maturing August 1, 2015 through August 1, 2034 and carrying interest rates of 2.000% to 5.000%; $254,380,000 Series B Bonds maturing August 1, 2015 through August 1, 2026 and carrying interest rates of 2.00% to 5.00%. The proceeds of the Series A Bonds are to partially fund various projects throughout the Commonwealth and pay the costs of issuing the Bonds. The proceeds of the Series B Bonds are to be used to partially refund State Property and Building Commission


122

projects number 85, 87 and 88 and to partially refund Kentucky Asset/Liability Commission Project Notes titled 2005 General Fund First Series and pay the costs of issuing the Bonds.

The Turnpike Authority of Kentucky was created in the 1960 regular session of the General Assembly under present KRS sec-tions 175.410 through 175.990 as a body corporate and politic constituting a municipal corporation, political subdivision, and in-strumentality of the Commonwealth. The Authority is composed of the Governor, Lieutenant Governor, Attorney General, and Sec-retary of Transportation, Commissioner of Highways, State High-way Engineer, and Secretary of Economic Development. The Di-rector of the Office of Financial Management currently serves as the Authority’s Treasurer.

The Authority issued no bonds during fiscal year 2015. Kentucky Gas Pipeline Authority is a body corporate and politic to provide a financing mechanism for projects that will increase severance tax revenue for Kentucky, create jobs for Kentuckians, and create a competitive advantage in environmentally responsible development.

The authority issued no bonds during fiscal year 2015.

State Universities - The Board of Trustees of the University of Kentucky and the Boards of Regents of the University of Louis-ville, Eastern Kentucky University, Western Kentucky University, Murray State University, Morehead State University, Kentucky State University, and Northern Kentucky University are authorized under KRS 56.495 to issue debt for the purpose of constructing educational buildings and housing and dining facilities. In addi-tion, the University of Louisville is specifically authorized to issue debt for educational buildings under KRS 64.860 but is limited to $16 million of refunding debt.

State supported universities issued $414,925,000 in General Re-ceipts Bonds to refund various prior bond issues.

Eastern Kentucky University issued $14,280,000 in General Receipts Bonds dated April 7, 2015. These bonds consist of: $12,765,000 Series A serial bonds maturing on April 1, 2016 through April 1, 2035 carrying interest rates of 3.125% to 5.000% and $1,515,000 term bonds maturing on April 1, 2028 carrying an interest rate of 3.000%. These 2014 Series A maturing on or after April 1, 2026 shall be subject to optional redemption, in whole or in part, prior to their maturity at the option of the University on any date on or after April 1, 2025. The proceeds of the bonds will be use to pay the costs of various types of improvements to several athletic programs. Construction of a multi-purpose educational and athletic facility is included in the project, as well as renova-tions and improvements to existing men’s and women’s athletic facility and pay certain costs of issuing the bonds.

Morehead State University issued $27,460,000 in General Re-ceipts Refunding Bonds dated July 24, 2014. These bonds con-sist of: $22,620,000 Series A serial bonds maturing on October 1, 2014 through October 1, 2028 carrying interest rates of 2.00% to 5.00%. and $4,840,000 Series B serial bonds maturing on October 1, 2014 through October 1, 2029 carrying interest rates of 1.00% to 5.00%. These 2014 Series A and B Bonds maturing on or after October 1, 2024 shall be subject to optional redemption, in whole or in part, prior to their maturity at the option of the University on any date on or after April 1, 2024. The net proceeds of the bonds will be used to refund the University’s outstanding debt as follows: Morehead State University Consolidated Educational Buildings Refunding and Improvement Bonds, Series M, dated January 1, 2004, Morehead State University General Receipts, Taxable Build America Bonds 2009 Series A, dated July 29, 2009 and Morehead State University General Receipts Taxable Build America Bonds 2010 Series A, dated June 29, 2010 and pay certain costs of issuing the bonds.

Murray State University issued $26,000,000 General Receipts Bonds, 2015 Series A, dated March 31, 2015. These bonds mature March 1, 2017 through March 1, 2035 carrying interest rates of 3.00% to 5.00%. This bond issue is subject to redemption prior to maturity at the option of the University, in whole or in part at any time on or after March 21, 2025. The proceeds of these bonds will be used to finance the construction of a new residence hall to replace Franklin Hall and pay certain costs of issuing the bonds.

The University of Kentucky issued $347,185,000 of General Re-ceipts Revenue and Revenue Refunding Bonds as follows:

$88,145,000 of General Receipts Revenue Refunding Bonds Se-ries 2014 D dated July 28, 2014. These bonds mature October 1, 2014 through October 1, 2025 and carry interest rates of 3.00% to 5.25%. These 2014 Series D Bonds maturing on or after October 1, 2024 shall be subject to optional redemption, in whole or in part, prior to their maturity at the option of the University on any date on or after October 1, 2023. The net proceeds will refund CERB, Series P, Q, R (2nd), partially refund General Receipts Series 2005 A bonds and 2005 A notes and pay certain costs of issuing the bonds.

$259,040,000 of General Receipts and General Receipts Re-funding Bonds dated April 15, 2015. These bonds consist of: $141,905,000 2015 Series A serial bonds maturing April 1, 2016 through April 1, 2045 carrying interest rates of 2.500% to 5.000%, $97,440,000 2015 Series B serial bonds maturing October 1, 2018 through October 1, 2027 carrying an interest rate of 5.000% and $19,695,000 2015 Series C serial bonds maturing October 1, 2015 through October 1, 2026 carrying interest rates of 2.000% to 4.000 %. The 2015 Series A Bonds maturing on or after April 1, 2026 shall be subject to optional redemption, in whole or in part, prior to their maturity at the option of the University on any date on or


123

after April 1, 2025. The 2015 Series B and C Bonds maturing on or after October 1, 2025 shall be subject to optional redemption, in whole or in part, prior to their maturity at the option of the University on any date on or after April 1, 2025. The 2015 Series A Bonds were issued to renovate and upgrade HealthCare Facili-ties and pay certain costs of issuing the 2015 Series A bonds. The proceeds of the 2015 Series B and C Bond Issues will be applied as follows; partially refund 2007 Series A - UK General Receipts Series, partially refund 2007 Series B - UK General Receipts Se-ries, partially refund 2006 Series A - UK General Receipts Series, completely refund Consolidated Educ. Buildings Series U and pay certain costs if issuing the 2015B and 2015C bonds.

The Kentucky Housing Corporation was established in 1972 under KRS Chapter 198A, as a municipal corporation. The Cor-poration is authorized to increase the supply of housing for per-sons of lower income by making or participating in insured con-struction loans, and making or participating in insured mortgage loans when financing is not available from private lenders under reasonably equivalent terms and conditions. The Corporation is limited to a $5.0 billion total maximum principal value of debt outstanding.

The Corporation issued $91,445,000 in Housing Revenue Bonds which consisted of the following:

$61,445,000 of Housing Revenue Bond dated July 2, 2014. These bonds consist of: $46,720,000 Series A serial bonds (taxable) ma-turing semi annually January 1, 2015 and July 1, 2015 through July 1, 2024 carrying interest rates of 0.250% to 3.418%, $6,975,000 term bond maturing on July 1, 2029 and carrying an interest rate of 3.948% and $7,750,000 term bond maturing on January 1, 2034 and carrying an interest rate of 4.296%. This bond issue is subject to redemption prior to maturity at the option of the Corporation, in whole or in part at any time on or after January 1, 2024. These bonds are also subject to special optional redemption at the option of the Corporation, in whole or in part, at any time from recover-ies of principal or excess revenues. The net proceeds of this issue together with the proceeds from the sale of related assets will be used to complete the economic refunding or redemption in their entirety the Series 2004 D, F, G, and H and Series 2005 C, D, and E bonds and pay certain costs of issuing the bonds.

$30,000,000 of Housing Revenue Bond dated December 18, 2014. These bonds consist of: $11,885,000 Series A serial bonds (tax-able) maturing semi annually July 1, 2015 and January 1, 2016 through July 1, 2025 carrying interest rates of 0.180% to 3.378%, $5,685,000 term bond maturing on July 1, 2029 and carrying an interest rate of 3.828%, $4,335,000 term bond maturing on July 1, 2032 and carrying an interest rate of 4.097% and 8,095,000 term bond maturing on July 1, 2036 and carrying an interest rate of 4.000%. This bond issue is subject to redemption prior to maturity at the option of the Corporation, in whole or in part at any time

on or after January 1, 2024. These bonds are also subject to special optional redemption at the option of the Corporation, in whole or in part, at any time from recoveries of principal or excess revenues. The net proceeds of this issue together with the proceeds from the sale of related assets will be used to complete the economic refund-ing or redemption in their entirety the Series 2005 G and Series 2005 H bonds and pay certain costs of issuing the bonds.

The Kentucky Infrastructure Authority was created by House Bill 217, passed into law during the 1988 regular session of the Kentucky General Assembly, to assist governmental agencies of the State with respect to the construction and acquisition of infra-structure projects as defined in the legislation. Pursuant to this Act, which amends KRS Chapter 224A, all powers, duties, and obliga-tions of the Kentucky Pollution Abatement and Water Resources Finance Authority, including administration of debt service on revenue bonds previously issued by the Authority, are transferred to the Kentucky Infrastructure Authority, which is established as a body corporate and politic, constituting a public corporation and a governmental agency and instrumentality of the State.

The authority issued the following bonds:

$64,465,000 Wastewater and Drinking Water Revolving Fund Revenue Refunding Bonds, Series 2015A dated May 21, 2015. The bonds mature February 1, 2016 through February 1, 2026 carrying interest rates of 2.000% to 5.000%. This bond issue is subject to early redemption as described in the official document. The pro-ceeds will be used to partially refund the Authority’s 2010 Series A Bonds and pay certain costs of issuance of the 2015 Series A Bonds.

$4,770,000 Governmental Agencies Program Revenue Improve-ment Bonds, Series 2015 dated May 21, 2015. The bonds mature August 1, 2016 through August 1, 2021 carrying interest rates of 2.000% to 4.000%. This bond issue is not subject to early redemp-tion as described in the official document. The proceeds will be used to provide loans tp certain Governmental Agencies to finance infrastructure projects of those Governmental Agencies and pay the costs of issuance of the Series 2015 Bonds. The Kentucky Higher Education Assistance Authority is the Commonwealth of Kentucky's agency for improving higher educa-tion opportunities by insuring eligible student loans and providing other financial aid and related services to eligible students. The Au-thority is an issuer of student loans pursuant to the Federal Higher Education Act of 1965, as amended in Kentucky and Alabama. As such, the Authority is responsible for issuing loan insurance, pro-viding collection assistance to lenders for delinquent loans, paying lender claims for loans, and collecting defaulted loans on which claims have been paid.


124


The Kentucky Higher Education Student Loan Corporation is empowered by KRS Chapter 164A to make and reinsure stu-dent loans with the United States of America, pursuant to the Fed-eral Higher Education Act of 1965, and as a body corporate and politic acts as a financing authority to assure a secondary market for insured student loans. The Corporation is governed by board of directors appointed by the Governor, as prescribed in KRS 164A.050. The Corporation is limited to a maximum principal outstanding of $5 billion.

The Corporation issued $134,605,000 in Student Loan Asset- backed Bonds Series 2015-1 dated February 26, 2015 with a final maturity date of December 1, 2031 which carry variable interest rates that change based on specified indices. These bonds will bear interest, except for the initial accrual period, at an annual rate equal to 100% of one-month LIBOR as of the second business day prior to the applicable interest accrual period plus .75%. The proceeds from the sale of the bonds will be used to make an initial deposit to the Acquisition Fund, the Capitalized Interest Fund and the Re-serve Fund. Amounts deposited to the Acquisition Fund along with certain other moneys available to the Corporation are expected to be used to defease all outstanding bonds issued by the Corporation under the 1997 General Bond Resolution and to repay certain other Issuer debt obligations that are secured by student loans.

The Kentucky Public Transportation Infrastructure Author-ity is an independent de jure municipal corporation and political subdivision of the Commonwealth established in 2009 pursuant to KRS Chapter 175B, as amended. The authority reviews, approves and monitors certain significant transportation projects within the Commonwealth and between the Commonwealth and other states.


The Kentucky Local Correctional Facilities Construction Au-thority is a body corporate and politic as well as an agency and instrumentality of the Commonwealth created in 1982 pursuant to KRS 441.605 through 441.695, as amended, to provide additional and alternative methods for acquiring, constructing, improving or repairing, and financing both regional and local jail facilities. The authority issued no bonds during fiscal year 2015.

The School Facilities Construction Commission was created by act of the 1985 Extraordinary Session of the Kentucky General Assembly as the successor agency to the Kentucky School Build-ing Authority (KSBA) and empowered pursuant to KRS 157.640 with all rights of successorship necessary to assure all legal and contractual functions and liabilities associated with the outstand-ing bonds issued in the name of the Authority, including refunding of then existing Authority debt. The Commission is an indepen-

dent corporate agency and instrumentality of the Commonwealth pursuant to KRS 157.611 through 157.640 and empowered therein to: (1) act on behalf of local school districts to issue bonds in the name of the Commission and to enter into lease agreements with local boards of education to finance construction of new facilities or major renovation of existing facilities; (2) enter into agreements which may provide for a percentage discount, on a biennially re-newable basis, of annual lease agreements due the Commission for those districts which participate; and (3) enter into lease agree-ments with the Department of Education to build State-owned fa-cilities operated by the Department of Education.

During the fiscal year ended June 30, 2015, the Commission sold school building revenue and revenue refunding bond issues having aggregate state participation of $212,634,272 maturing through June 30, 2035, at interest rates of 0.850% to 5.00%. Due to the length of the listing, the reader is referred to the detail Schedule of Bonds Outstanding at June 30, 2015, which is contained in the publication titled SUPPLEMENTARY INFORMATION to the Kentucky Comprehensive Annual Financial Report for the Fiscal Year Ended June 30, 2015. Copies of this report are available from the Division of Statewide Accounting, Financial Reporting Branch, 484 Capitol Annex, Frankfort, Kentucky 40601.

The Kentucky Agricultural Finance Corporation is a public corporation and governmental agency of the Commonwealth es-tablished by Act of the 1984 General Assembly for the purpose of “improving and promoting the health, welfare, and prosperity of the people of the Commonwealth through the stimulation of existing agricultural ventures.” The Authority's bond program is designed to help lender banks and other financial institutions assist eligible farmers in obtaining low interest loans through the issu-ance of tax-exempt agricultural revenue bonds. The Authority's debt does not constitute a legal or moral obligation of the Com-monwealth, and this debt is not included in these general-purpose financial statements.

The Corporation issued no bonds during the fiscal year ended June 30, 2015.

The Kentucky Economic Development Finance Authority es-tablished in 1958 under KRS Chapter 154, is an independent agen-cy of the Commonwealth that operates in close cooperation with the Secretary of the Economic Development Cabinet to promote the industrial development of Kentucky.

The Authority issued no bonds during the fiscal year ended June 30, 2015.


125

Year Ending June 30

2016 $ 430,868 $ 261,471 $ 692,3392017 428,680 244,317 672,9972018 446,771 225,804 672,5752019 489,056 205,074 694,1302020 487,920 182,789 670,709

2021-2025 2,073,115 610,156 2,683,2712026-2030 1,452,695 226,832 1,679,5272031-2035 345,608 27,314 372,9222036-2040 228 228

Total $ 6,154,941 $ 1,983,757 $ 8,138,698

Future revenue bond debt service requirements, to be paid with State Funds, atJune 30, 2015, are as follows (Expressed in Thousands):

TotalsPrincipal Interest

Year Ending June 30 Principal

2016 $ 120,904 $ 152,878 $ 273,7822017 136,965 149,016 285,9812018 597,735 133,184 730,9192019 148,740 116,821 265,5612020 155,632 111,124 266,756

2021-2025 802,373 475,939 1,278,3122026-2030 1,363,207 334,447 1,697,6542031-2035 641,926 209,542 851,4682036-2040 329,730 134,483 464,2132041-2045 244,080 83,934 328,0142046-2050 94,070 43,702 137,772Thereafter 97,890 12,174 110,064

Total $ 4,733,252 $ 1,957,244 $ 6,690,496

Interest Totals

Future revenue bond debt service requirements for bonds issued by the Commonwealth's Component Units at June 30, 2015, are as

follows (Expressed in Thousands):

Agency:

$ 3,756,315 1.00%-8.25% 2034

Kentucky School Facilities Construction Commission 944,111 .085%-5.90% 2035

Turnpike Authority of Kentucky 1,454,515 1.00%-5.72% 2034

Total $ 6,154,941

The agencies and authorities that issue debt and their respective amounts of principaloutstanding, net of discounts and defeased bonds, at June 30, 2015, are as follows

(Expressed in Thousands):

Long-Term Obligations

State Property and Buildings Commission

Annual Maturity To Interest Rate

Principal Outstanding

Component Unit Revenue Bonds Payable (Expressed in Thousands):

Kentucky Housing Corporation * $ 944,290 .07-6.06% 2044Kentucky Infrastructure Authority* 277,775 2.00-5.29% 2032Kentucky Higher Education Student Loan Corporation 1,067,324 .14-5.00% 2038Kentucky Public Transportation Infrastructure Authority 816,725 3.00-6.875% 2053University of Kentucky* 751,735 1.46-4.50% 2044University of Louisville* 295,559 1.30-6.46% 2044Eastern Kentucky University 69,900 3.00-5.00% 2032Western Kentucky University* 217,185 2.00-5.00% 2033Murray State University * 79,650 2.00-4.50% 2034Morehead State University 83,976 1.00-6.00% 2033Kentucky State University 3,198 3.625-3.875% 2027Northern Kentucky University* 125,935 2.00-5.00% 2034

Total Component Unit Revenue Bonds Payable $ 4,733,252

* Amounts reflect original issue

Principal Outstanding Interest Rate

Annual Maturity To


126

Year Ending June 30

2016 $ 4,600 $ 6,658 $ 11,2582017 4,830 6,428 11,2582018 5,075 6,186 11,2612019 5,325 5,932 11,2572020 5,590 5,666 11,256

2021-2025 32,450 23,847 56,2972026-2030 41,620 14,675 56,2952031-2035 30,590 3,186 33,776

Total $ 130,080 $ 72,578 $ 202,658

Future debt service requirements, under Memorandum of Understanding

June 30, 2015, are as follows (Expressed in Thousands)

Principal Interest Totals

to be paid with State Funds, at

NOTES PAYABLE At June 30, 2015, the following entities had notes payable as follows:

The Kentucky Asset/Liability Commission, created by House Bill 5 enacted by the 1997 Extraordinary Session of the Kentucky General Assembly, develops policies and strategies to minimize the impact of fluctuating interest rates on the Commonwealth's interest-sensitive assets and liabilities. It is authorized to issue tax and revenue anticipation notes, project notes and funding notes. Tax and revenue notes are to be used for the purpose of providing monies to discharge expenditure demands in anticipation of rev-enues and taxes to be collected during the fiscal year. Project notes are to be used for authorized projects upon request of the Finance and Administration Cabinet, to be repaid through financing agree-ments or alternative agreements. Funding notes are to be used for the purpose of funding judgments against the Commonwealth or any state agency.

The Commission issued no notes during fiscal year 2015.

The Component Units of the Commonwealth reported notes pay-able of $177,639,000 in their individual audited financial state-ments, details concerning their notes payable are presented in the notes to those financial statements. A copy of their individual fi-nancial statements may be obtained from the component unit, at the address shown on pages 136 and 137.

Other Long-term Liabilities - The General Fund, special rev-enue, and internal service funds in which leases are recorded will liquidate the capital lease obligations. The compensated absences will be liquidated by applicable governmental and internal ser-vice funds that account for the salaries and wages of the related employees. The net pension obligations will be liquidated by the State’s governmental and internal service funds that contribute to-ward the pension funds, based on the statutorily required contribu-tion rates. The General Fund and transportation-related Special Revenue fund will generally liquidate other claims and judgments attributable to the governmental activities.

Memorandum of Understanding (MOU) - The Commonwealth of Kentucky has entered into an understanding with The Lexing-ton-Fayette Urban County Government Public Facilities Corpora-tion (LFUCGPFC). The Corporation has issued Lease Revenue Bond, Series 2011A (Eastern State Hospital) in the amount of $138,635,000. These bonds are special and limited obligation of the corporation and do not constitute a debt, liability, or obliga-tion or a pledge of the full faith and credit or taxing power of the Corporation or the Commonwealth of Kentucky. The bonds were issued in order to construct, furnish and equip a new State Mental Health Hospital with the understanding that the Commonwealth will fund the debt service of the Corporation by making Biennial Appropriations for this purpose. The net proceeds from the bond issue have been deposited in the Commonwealth of Kentucky’s account and construction costs are being recorded as Construction in Progress. The debt service requirement for the memorandum of understanding is shown in the chart below.


127

Commonwealth of Kentucky State Office Building Project

The Finance and Administration Cabinet, a statutory adminis-trative organization of the Commonwealth entered into a Lease Agreement with semi-annual payments to pay the principal and interest due on the Certificates of Participation (Certificates) dated April 29, 2015 to fund this project.

The Cabinet issued $68,575,000 in Certificates which consisted of $19,380,000 2015 serial Certificates maturing June 15, 2017 through June 15, 2030 and carrying interest rates of 2.00% to 5.00%; $3,370,000 4.00% Series 2015 Term Certificates due June 15, 2032; $3,580,000 5.00% Series 2015 Term Certificates due June 15, 2034; $8,035,000 5.00% Series 2015 Term Certificates due June 15, 2038; $4,475,000 4.00% Series 2015 Term Certifi-cates due June 15, 2040; $12,360,000 4.00% Series 2015 Term Certificates due June 15, 2045; $5,460,000 4.00% Series 2015 Term Certificates due June 15, 2047 and $11,915,000 4.125% Se-ries 2015 Term Certificates due June 15, 2051. The proceeds of the

bonds will be deposited to various trustee bank accounts and will be used to construct, install and equip an office building consist-ing of approximately 371,160 square feet in Frankfort, Kentucky and pay certain costs of issuing the certificates. The Cabinet also has an annual trustee fee of $3,000 through June 15, 2015 and has entered into a Facilities Lease agreement (renewable in two year increments at the option of the Cabinet) with the facilities lessor to provide certain management and maintenance services pertaining to the office building. The office building is designed to accom-modate 1,400 workers which will be displaced due to the termina-tion of a lease on privately owned space used by Commonwealth agencies. The Commonwealth maintains an option to purchase. The debt service requirement, the trustee fee and management and maintenance fee under the lease agreement is shown in the chart below.

Year Ending June 30

2016 $ $ 2,829 $ 3 $ 2,8322017 1,150 2,829 429 4,4082018 1,160 2,806 442 4,4082019 1,205 2,748 455 4,4082020 1,250 2,687 468 4,405

2021-2025 6,820 12,659 2,561 22,0402026-2030 7,795 11,282 2,966 22,0432031-2035 8,845 9,757 3,436 22,0382036-2040 10,615 7,450 3,981 22,0462041-2045 12,360 5,061 4,613 22,0342046-2050 14,265 2,430 5,345 22,0402051-2055 3,110 128 1,167 4,405

Total $ 68,575 $ 62,666 $ 25,866 $ 157,107

Future debt service requirements for Certificates of Paticipation June 30, 2015, are as follows (Expressed in Thousands)

Principal Interest Totals& MaintenanceOperations


128

Pollution Remediation Liabilities - GASB Statement 49 estab-lishes the guidance reporting entities are to use in estimating and reporting potential cost which may be incurred for pollution reme-diation. GASB 49 requires the Commonwealth to reasonably esti-mate and report a remediation liability when any of the following obligating events has occurred:

• Pollution poses an imminent danger to the public and the Com-monwealth is compelled to take action;

• The Commonwealth is in violation of a pollution related per-mit or license;

• The Commonwealth is named or has evidence that it will be named as a responsible party by a regulator;

• The Commonwealth is named or has evidence that it will be named in a lawsuit to enforce a cleanup; or

• The Commonwealth commences or legally obligates itself to conduct remediation activities.

The Commonwealth has remediation activities underway and these are in stages from site investigation, planning and design, clean up, and site monitoring. Several agencies, within state gov-ernment, have as a part of their mission the responsibility to in-vestigate possible pollution sites, and oversee the remediation of those sites. These agencies have the expertise to estimate the remediation obligations presented herein based on prior experi-ence in identifying and funding similar remediation activities. The remediation liabilities reported have been calculated based upon cost estimates. Situations posing potential liabilities, for which a reasonable estimate could not be made, have not been included.

The remediation obligation estimates presented in this report are subject to change over time. Cost may vary due to price fluctua-tions, changes in technology, changes in potential responsible parties, results of environmental studies, changes to statutes or regulations and other factors that could result in revisions to the estimates. Prospective recoveries from responsible parties may re-duce the Commonwealth’s obligation. The amounts recorded as obligations are shown in the Changes in long-term liabilities chart on page 129.

Unemployment Insurance Liability to the Federal Govern-ment - The downturn in the economy created an increased demand for unemployment insurance payments. The increased demand de-pleted the funds the Commonwealth had on deposit with Federal government to pay claims. As a result, the Commonwealth has borrowed money from the Federal government to pay unemploy-ment insurance claims. At June 30, 2015 the amount borrowed was $38.1 million. The loan is being repaid by amounts resulting from the Federal Unemployment Tax Credit Reduction Act and changes in the Commonwealth’s Unemployment Insurance Program.

Deferred Outflows/Inflows in theGovernmentwide Statement of Net Position are as follows(Expressed in Thousands):

Deferred Outflow of Resources: Deferred Loss on Refunding $ 3,720 $ $ 14,511 Interest Rate Swap-Derivative 26,237 2,983 Pension Related Outflows 924,732 13,621 26,242 Total $ 954,689 $ 13,621 $ 43,736

Deferred Inflow of Resources: Deferred Gain on Refunding $ 36,052 $ $ 20,013 Interest Rate Swap-Derivative 26,237 271 Service Concession Arrangement 244,524 Pension Related Inflows 1,670,710 3,311 19,510 Total $ 1,732,999 $ 3,311 $ 284,318


Major Component

Units Business-Type

Activities

Deferred Outflows and Inflows - GASB 65 provides financial reporting guidance relative to deferred outflows of resources, a consumption of assets by the entity that is applicable to a future reporting period, and a deferred inflow of resources, an acquisi-tion of assets by the entity that is applicable to a future reporting period. The following table provides information about amounts reported as deferred inflows of resources and deferred outflows of resources on the Government-Wide Statement of Net Position. GASB 68 and GASB 71 establish financial reporting of deferred inflows of resources and deferred outflows of resources related to pensions. Additional information can be found in Note 8.


129

Year Ending June 30

2016 $ 83,145 $ 2,344 $ 85,4892017 44,169 2,248 46,4172018 16,550 935 17,4852019 2,303 474 2,7772020 1,801 430 2,231

2021-2025 9,403 1,624 11,0272026-2030 6,785 1,022 7,8072031-2035 6,036 471 6,5072036-2040 7,447 232 7,679

Total $ 177,639 $ 9,780 $ 187,419

Future debt service requirements for aggregated Notes Payable for the Component Units at June 30, 2015, are as follows (Expressed in Thousands)


Year Ending June 30

2016 $ 175,283 $ 59,796 $ 235,0792017 163,335 53,781 217,1162018 195,599 47,073 242,6722019 168,681 39,857 208,5382020 140,815 32,912 173,727

2021-2025 481,945 84,662 566,6072026-2030 141,915 6,746 148,661

Total $ 1,467,573 $ 324,827 $ 1,792,400


Future debt service requirements for aggregated Notes Payable for the Primary Government at June 30, 2015, are as follows (Expressed in Thousands)

Ending Balance

Due In One Year

Due Thereafter

Governmental ActivitiesCompensated absences $ 224,918 $ 11,728 $ (400) $ 236,246 $ 157,698 $ 78,548Capital leases 55,444 30,577 (14,528) 71,493 16,510 54,983Claims liability 209,127 42,469 (36,136) 215,460 27,125 188,335Notes payable 1,868,377 (400,804) 1,467,573 175,283 1,292,290Certificate of Participation 68,575 68,575 68,575Bonds payable 6,291,646 596,634 (733,338) 6,154,942 430,868 5,724,074

Unamortized premiums 355,817 78,399 (64,426) 369,790 27,752 342,038Unamortized discounts (11,577) (973) 1,675 (10,875) (842) (10,033)

Judgments and contingent liabilities 63,356 18,042 (13,801) 67,597 50,128 17,469LFUCGPFC MOU obligations 134,460 (4,380) 130,080 4,600 125,480Pollution remediation liabilities 23,246 6,507 (15,253) 14,500 6,259 8,241Unfunded employer OPEB contributions 3,597,822 (40,496) 3,557,326 3,557,326Net pension liability 28,070,935 182,584 (1,028,644) 27,224,875 27,224,875

Total Governmental Activities 40,883,571 1,034,542 (2,350,531) 39,567,582 895,381 38,672,201

Business-Type ActivitiesCompensated absences 7,430 1,555 (1,258) 7,727 5,037 2,690Capital leases 13,065 259 (1,062) 12,262 1,073 11,189Claims and claims adjustment liability 1,112,110 1,530,672 (1,569,331) 1,073,451 153,931 919,520Judgments and contingent liabilities 32 125 (157)Net pension liability 224,047 8,357 232,404 232,404Loans payable to the Federal government 389,014 343,193 (694,052) 38,155 38,155

Total Business-Type Activities 1,745,698 1,884,161 (2,265,860) 1,363,999 198,196 1,165,803

Total Primary Government $ 42,629,269 $ 2,918,703 $ (4,616,391) $ 40,931,581 $ 1,093,577 $ 39,838,004

Major Component Units Compensated absences $ 26,914 $ 9,986 $ (13,955) $ 22,945 $ 4,418 $ 18,527Capital leases 397,576 59,119 (234,926) 221,769 43,801 177,968Prize liability 58,017 2,474 (16,974) 43,517 27,820 15,697Notes payable 134,605 175,326 (169,441) 140,490 67,759 72,731Bonds payable 3,916,091 622,913 (662,250) 3,876,754 73,816 3,802,938Net pension liability 495,829 30,118 525,947 525,947

Total Major Component Units $ 5,029,032 $ 899,936 $ (1,097,546) $ 4,831,422 $ 217,614 $ 4,613,808

Beginning Balance

(Restated) Additions Reductions

Changes in long-term liabilities for the fiscal year ended June 30, 2015, are summarized as follows (Expressed in Thousands):


130

Interest Rate Swap Agreements - The Commonwealth currently has four outstanding interest rate swaps. Each of these swaps were entered into to synthetically fix the interest rate on floating rate bonds. The notes were issued concurrent with the execution of the swap. Each of the interest rate swaps amortizes to match the sink-ing fund schedule of the hedged notes.

Credit Risk - There are certain collateral and termination re-quirements triggered by credit rating and minimal capital thresh-olds for the counterparty, and termination requirements triggered by credit ratings thresholds for the Commonwealth Asset Liability Commission. Those thresholds are being met as of June 30, 2015. There is no collateral pledged by either.

Interest Rate Risk - The Commonwealth’s interest rate swaps were designed to synthetically fix the rate on four floating rate debt issuances. In order to achieve this goal, the amortization schedules, floating rate formula and index, pricing dates and other variables of both the floating rate side of the swap and the debt are exactly matched. Using the Synthetic Instrument Method for de-termining hedge effectiveness showed 100% for each derivative. Because the pricing dates, formulas and indices are identical, there is no basis risk.

Termination Risk - Mandatory termination of each of these swaps would be triggered if the credit ratings of the Commonwealth State Property and Building Commission were to fall below BBB by Standard and Poor’s or Baa2 by Moody’s or if the credit ratings of the counterparty were to fall below A3 by Moody’s or A- by Standard and Poor’s or if the credit ratings of the insurer falls be-low A3 by Moody’s and A- by Standard and Poor’s. Additional mandatory termination events include default, merger without as-sumption and failure to perform under the ISDA or indenture by any of the parties. The Commonwealth has the right to exercise optional early termination on each of these swaps with the consent of the insurer. The counterparty does not have the right of optional early termination. Any early termination shall occur at then cur-rent market levels.

The following table provides descriptive information for each in-terest rate swap.

Effective Maturity Pay-Fixed Fair Value Fair Value Change inProject Notes Date Original Outstanding Date Rate Variable Rate 6/30/2014 6/30/2015 Fair Value2007 ALCo 5/31/2007 $ 25,210 $ 7,940 11/1/2017 3.839% 67% 3M LIBOR +.4% $ (618) $ (312) $ 3062007 ALCo 5/31/2007 71,310 66,310 11/1/2021 4.042% 67% 3M LIBOR +.52% (8,143) (6,659) 1,4842007 ALCo 5/31/2007 70,935 70,935 11/1/2025 4.125% 67% 3M LIBOR +.55% (12,160) (12,041) 1192007 ALCo 5/31/2007 75,625 56,985 11/1/2025 4.066% 67% 3M LIBOR +.53% (7,851) (7,224) 627

Total $ 243,080 $ 202,170 ** $ (28,772) $ (26,236) $ 2,536 *

* The Change in Fair Value is classified as Deferred Outflow of Resources on the Statement Of Net Position** The Total Outstanding Notional Amount equals the outstanding note liability which is classified as a liability on the Statement of Net Position

Terms of each Hedging Derivative

Notional Amounts

Cashflow Interest Rate Swapsat June 30, 2015 (Expressed in Thousands)


Year Ending June 30

2016 $ 6,545 $ 1,176 $ 6,766 $ 14,4872017 6,810 1,362 6,315 14,4872018 18,005 1,275 5,904 25,1842019 15,410 1,154 5,352 21,9162020 16,705 1,039 4,817 22,561

2021-2025 104,690 3,089 14,482 122,2612026-2030 30,160 221 1,026 31,407

Total $ 198,325 $ 9,316 $ 44,662 $ 252,303

Future debt service requirements for aggregated ALCo Notes Associated with Interest Rate Swaps at June 30, 2015



Principal Interest TotalsPaymentsNet Swap


131

Note 16

COMMITMENTS AND CONTINGENCIES

Litigation - The Commonwealth, its units and employees are par-ties to numerous legal proceedings, many of which normally occur in governmental operations. The legal proceedings are not, in the opinion of the Attorney General, likely to have a material adverse impact on the Commonwealth’s financial position.

In addition, the Commonwealth and its component units are involved in certain other legal proceedings which, if decided adversely to the Commonwealth, may require the Commonwealth to make mate-rial future expenditures for expanded services or capital facilities, may impair future revenue sources, or may require the refund of prior collections. It is neither possible to determine the outcome of these proceedings nor to estimate the possible effects adverse decisions may have on the future expenditures or revenue sources of the Commonwealth.

Judgments and Contingencies – A claim is a suit that has been filed but there has been no decision rendered by the court systems. Amounts reported include claims made against the Commonwealth during the period preceding June 30 of the current fiscal year. Claims are classified according to their chance of occurrence as either remote, possible, or probable. Claims are further classified as payable within one year, within future periods, or a combination of the two periods.

A judgment is any amount that is to be repaid as the result of a court decision or an award for the condemnation of private property. Reasons for such amounts also arise from employment, contracts, and government involvement of personnel or property. The General Fund, the Agency Revenue Fund, the Transportation Fund, and the State Parks Fund generally pay claims and judgments. These amounts are classified as either payable within one year, in future periods, or a combination of the two periods if they remain unpaid after June 30 of the current fiscal year.

Federal Grants - The Commonwealth receives significant financial assistance from the U.S. Government in the form of grants and Fed-eral revenue sharing entitlements. Entitlement to these resources is generally conditioned upon compliance with terms and conditions of the grant agreements and applicable Federal regulations, including the expenditure of the resources for eligible purposes. Substan-tially all grants are subject to financial and compliance audits by the grantors. Any disallowance as a result of these audits becomes a liability of the Commonwealth.

Leases - The Commonwealth has entered into various operating leases for land and buildings. All leases contain termination clauses providing for the cancellation after 30, 60, or 90 days written notice to the lessors. In addition, all leases contain appropriation clauses

indicating that continuation of the lease is subject to funding by the legislature. It is expected that in the normal course of business, similar leases will replace most of these leases. Primary Government expenditures for rent under leases for the years ended June 30, 2015 and 2014 amounted to $151.4 and $152.3 million, respectively. The operating leases of the Commonwealth do not contain escalation clauses for rental or expense that would require adjustment to be in compliance with GASB Statement 13.

Compensated Absences – Compensated absences include accumu-lated, unpaid vacation and compensatory time accruals. The amount accruing to proprietary funds has been included in the respective funds when material. The policy of the Commonwealth is to record the cost of annual and compensatory leave. Annual leave is accu-mulated at amounts ranging from 7.5-8.0 to 15.00-16.00 hours per month, as determined by the length of service, with the maximum accumulations ranging from 30 to 60 days. The calendar year is the period used for determining accumulated leave. Compensatory leave is granted to authorized employees on an hour-for-hour basis or a time and one-half basis. Compensated absences are generally paid from the General Fund, the Transportation Fund, the Federal Fund, the Agency Revenue Fund, and the Other Special Revenue Fund. At June 30, 2015, the estimated liability for annual and com-pensatory leave was $236,244,148 for the governmental activities, and $7,728,168 in the business-type activities.

Compensated absence liabilities for the major component units totaled $22,945,000 at June 30, 2015.

Sick Leave - The policy of the Commonwealth is to record the cost of sick leave when paid. Generally, since sick leave (earned one day per month with unlimited accumulation) is paid only when an employee is absent due to illness, injury, or related family death, there was no liability recorded for sick leave at June 30, 2015. The estimated accumulated amount of unused sick leave at that date for the governmental and business-type activities was $411,464,225 and $13,433,834, respectively.

Construction Projects - The Transportation Cabinet, at June 30, 2015, had contractual commitments of approximately $1,477,082,142 for the construction, maintenance and operation of the highway system. It is anticipated that these projects will be funded with ap-proximately 32 percent State funds, 48 percent Federal funds, and the remaining 20 percent with proceeds from the sale of revenue bonds.

The Commonwealth of Kentucky and the State of Indiana have entered into a legal agreement known as the “Bi-State Develop-ment Agreement” which governs “The Louisville-Southern Indiana Ohio River Bridges Project (LSIORBP).” The project consists of the construction of the East End Bridge and highway connections that will complete an outer loop around the greater Louisville area; a Downtown Crossing including a new I-65 bridge for northbound traffic; a revamped John F. Kennedy Memorial Bridge for south-


132

bound traffic, and rebuilding of the downtown interchanges on both sides of the Ohio River. Kentucky is responsible for the financing, reconstruction and operational improvements of the Downtown Crossing Bridges; and, Indiana is responsible for financing and constructing the East End Crossing.

The LSIORBP structures will be ultimately owned 50% by Indiana and 50% by Kentucky and is expected to cost $2.6 billion. Ken-tucky’s portion of the total project cost is estimated to be $1.3 bil-lion and Indiana’s portion is estimated to be $1.3 billion. Kentucky plans to finance its portion of the LSIORBP partially through the Authority. The project is being funded in part with a combination of governmental purpose tax-exempt debt in the form of a TIFIA loan, Grant Anticipation Revenue Vehicle (GARVEE) bonds backed by future federal funds, and governmental purpose tax-exempt and taxable debt in the form of toll revenue bonds. The toll revenue bonds principal and interest and the TIFIA loan principal and inter-est will be issued by the Authority and paid solely by Kentucky’s share of project revenues issued by the Authority and paid solely by Kentucky’s share of project revenues (primarily tolls). These financing instruments do not constitute of debt of the Commonwealth or any of its political subdivisions. Neither the faith and credit nor the taxing power of the Commonwealth is pledged to the payment of the above described debt.

Under the six year highway plan adopted by the Commonwealth, the Commonwealth parties will provide up to $536 million in future federal funds to be used for the Downtown Crossing. This includes $300 million in traditional federal funds ($50 million per State Fis-cal Year for six years beginning with State Fiscal Year 2013) and the proceeds of approximately $236 million of preciously issued GARVEE bonds for construction, for a total of $536 million. In addition, Kentucky will utilize approximately $763 million in tax exempt and taxable bonds and notes, a portion of which will be retired in 2017 with a $452 million low interest, long-term TIFIA loan from the U.S. Department of Transportation.

The Commonwealth parties have spent approximately $1 billion to date and the State of Indiana has spent approximately $350 mil-lion to date. The Commonwealth’s expenditures are included in construction in progress and reflected in the statement of revenues, expenses, and changes in net position within contributed capital and beginning net position.

The Authority has entered into various contracts for services in con-nection with the operation of the Tolls consisting of toll oversight, marketing and communication services, and toll transponders. Additional contracts are in the process of being procured, but have not yet been executed. These contracts relate to services for the toll custodian, and E-ZPass. Costs under the toll contracts described above will be paid as services are rendered and will be split between the Commonwealth (through the Authority) and the State of Indiana.

Deferred Inflows of Resources – Deferred inflows of resources in the governmental funds represents unavailable revenues. “Unavail-able” means that the assets are not available to finance expenditures of the current fiscal period.

Unearned Revenue – Unearned revenue may result from the rec-ognition of assets before the earnings process is complete and is reported as a contingent liability.


133


134

Note 17SUBSEQUENT EVENTS

The debt-issuing entities of the Commonwealth issued or agreed to administer State participation in debt service payments for rev-enue bonds sold after June 30, 2015, and prior to December 11, 2015, and reported other subsequent events for the same period, as described below.

The State Property and Buildings Commission issued the fol-lowing bonds:

$20,075,000 Project No. 109, Judicial Branch Agency Revenue Bonds dated October 8, 2015.These bonds consist of Serial bonds maturing on October 1, 2016 through October 1, 2023 carrying interest rates of 2.10% to 5.00%. The net proceeds of this issue will be used to finance the acquisition, construction, equipping, and financing of the Phase 1 E-Case and Docket Management Sys-tem, to refund certain interim financing and pay certain costs of issuing the bonds.

$115,660,000 Project No. 110, Revenue and Revenue Refund-ing Bonds dated December 3, 2015.These bonds consist of Serial bonds maturing on February 1, 2016 through August 1, 2035 car-rying interest rates of 2.00% to 5.00%. The net proceeds of this issue will be used to finance a portion of various public projects, including economic development projects and community devel-opments, to refund certain outstanding bonds of the Kentucky In-frastructure Authority and pay certain costs of issuing the bonds.

$4,960,000 Project No. 111, Road Fund Revenue Bonds dated De-cember 3, 2015.These bonds consist of Serial bonds maturing on November 1, 2016 through November 1, 2035 carrying interest rates of 0.600% to 4.000%. The net proceeds of this issue will be used for the replacement of the existing C-1 maintenance in Frank-lin County with a new 36,000 square foot facility to be located on approximately fourteen (14) acres of land currently owned by the Transportation Cabinet on Wilkinson Boulevard in Frankfort, Kentucky and pay certain costs of issuing the bonds.

The Kentucky Asset/Liability Commission issued $106,850,000 of Project Notes, 2015 First Series Federal Highway Trust Fund First Series A dated October 15, 2015. These project notes mature September 1, 2016 through September 1, 2027 carrying interest rates of 2.00% to 5.00%. The net proceeds of this issue will be used to construct a new bridge over Kentucky Lake, to construct a new bridge over Lake Barkley, to widen certain portions of US 68/KY80 and pay certain costs of issuing the 2015 Notes.

The Turnpike Authority of Kentucky issued $68,880,000 of Economic Development Revenue Bonds, 2015 Series A dated July 22, 2015. These bonds mature on July 1, 2017 through July 1, 2033 carrying interest rates of 2.00% to 5.00%. The net proceeds

will be used to pay the costs of certain additions and improvements to the Kentucky Economic Development Road System, Revital-ization Project and pay certain costs of issuance of the 2015 Series B Bonds.

$122,005,000 of 2015 Series B Economic Development Revenue Refunding Bonds dated July 22, 2015. These bonds mature on July 1, 2017 through July 1, 2026 carrying interest rates of 3.00% to 5.00%. The net proceeds will be used to advance refund cer-tain maturities of the outstanding Economic Development Road Revenue Bonds (Revitalization Projects), 2006 Series A and the outstanding Economic Development Road Revenue Bonds (Revi-talization Projects), 2006 Series B Bonds and pay certain costs of issuance of the 2015 Series B Bonds.

Western Kentucky University issued $5,960,000 of General Re-ceipts Refunding Bonds, 2015 Series A dated October 13, 2015. These bonds mature March 1, 2016 through September 1, 2026 and carry interest rates of 2.00% to 3.00%. The net proceeds will be used to refund the University’s outstanding General Receipts Bonds, 2006 Series A maturing on and after September 1, 2017 and pay certain costs of issuing the bonds.

School Facilities Construction Commission administers the Commonwealth’s participation in the debt service payments of lo-cal public school district revenue bonds issued subsequent to June 30, 2015, and maturing as to principal through 2035 as displayed in the table on page 135.

KentuckyWired Infrastructure Company, Incorporated

The Commonwealth under a “Design/Build/Finance/Operate/Maintain” structure, determined to develop the Next Generation –Kentucky Infrastructure Highway System entered into a project agreement with KentuckyWired Infrastructure Company, Inc. a non-profit component unit of the Commonwealth. The non-profit was created for the sole benefit of Kentucky. The Commonwealth granted the non-profit an exclusive right to design, construct, fi-nance, operate and maintain the system in return for payments by the Commonwealth in the form of milestone payment, a desig-nated equipment payment and availability payments. All payments made by the Commonwealth to the non-profit are subject to appro-priation by the General Assembly.

In addition Kentucky Economic Development Finance Author-ity issued Senior Revenue bonds, series 2015A in the amount of $231,950,000 dated September 3, 2015 for the KentuckyWired In-frastructure Company, Inc.. The bonds consist of $231,950,000 Series A serial bond maturing on July 1, 2019 through January 1, 2045 carrying interest rates of 2.5% to 5.0%. The net proceeds of the bond will be used for the Next Generation Kentucky Informa-tion Highway project, a fiber optic backbone infrastructure which will extend into every county in the Commonwealth.


135

KENTUCKY SCHOOL FACILITIES CONSTRUCTION COMMISSION

Delivery Principal State InterestSchool District Date at Issue Share Rates (%)Augusta Independent 08/04/15 $ 1,055,000 $ 353,637 3.250%

Bullitt County 11/10/15 20,370,000 2,416,921 2.000% - 3.375%

Butler County 09/30/15 2,635,000 453,033 1.750% - 3.250%

Corbin Independent 07/30/15 1,626,000 1,626,000 1.000% - 4.000%

Estill County 08/11/15 1,095,000 995,904 1.000% - 3.625%

Estill County 10/22/15 2,155,000 489,990 1.750% - 3.000%

Fayette County 07/14/15 101,665,000 6,769,051 3.000% - 5.000%

Fayette County 07/28/15 21,425,000 476,175 4.000%

Fayette County 09/23/15 35,615,000 3,043,882 3.000% - 4.000%

Floyd County 08/04/15 52,595,000 5,572,702 2.000% - 4.000%

Fort Thomas Independent 11/17/15 23,810,000 22,998,200 2.000% - 3.375%

Fulton County 10/13/15 1,236,000 1,236,000 2.000% - 3.250%

Grayson County 07/07/15 1,180,000 576,550 1.300% - 3.500%

Hart County 10/29/15 3,335,000 3,011,588 2.00% - 3.125%

Johnson County 12/09/15 2,650,000 632,569 2.000% - 3.250%

Laurel County 08/25/15 14,260,000 869,408 2.000% - 3.500%

Lincoln County 11/17/15 6,745,000 2,422,372 2.000% - 3.000%

Logan County 12/10/15 372,000 372,000 2.000% - 4.000%

Marion County 07/06/15 1,745,000 376,053 0.400% - 1.500%

McCreary County 08/12/15 955,000 955,000 2.250% - 3.500%

Metcalfe County 08/18/15 5,790,000 649,097 2.000% - 3.625%

Menifee County 11/12/15 1,160,000 1,160,000 2.000% - 3.250%

Middlesboro Independent 07/09/15 5,690,000 1,206,496 2.000% - 3.500%

Owensboro Independent 10/15/15 6,190,000 754,317 2.000% - 3.500%

Rockcastle County 08/26/15 655,000 655,000 3.250%

Rowan County 07/07/15 4,285,000 1,546,081 1.000% - 3.750%

Rowan County 09/22/15 1,525,000 1,192,950 2.000% - 2.750%

Russell County 10/01/15 2,060,000 301,818 2.000% - 2.500%

Russell Independent 10/06/15 2,910,000 1,238,670 2.000% - 3.000%

Russellville Independent 07/14/15 450,000 450,000 2.200% - 3.500%

Simpson County 11/05/15 670,000 389,967 2.900%

Trimble County 07/09/15 1,425,000 1,425,000 1.000% - 3.500%

Williamstown Independent 09/01/15 2,040,000 1,258,116 1.000% - 3.750%

$ 331,374,000 $ 67,874,547


136

Audited financial statements may be requested at the following addresses:

Bluegrass State Skills CorporationCapital Plaza Tower500 Mero StreetFrankfort, Kentucky 40601

Turnpike Authority of Kentucky Room 78, Capitol Annex BuildingFrankfort, Kentucky 40601

Kentucky Transportation Cabinet200 Mero StreetFrankfort, Kentucky 40622

Kentucky Center for the Arts5 Riverfront PlazaLouisville, Kentucky 40202-2989

Kentucky Economic Development Finance AuthorityCapital Plaza Tower500 Mero StreetFrankfort, Kentucky 40601

Kentucky Housing Corporation1231 Louisville RoadFrankfort, Kentucky 40601

Kentucky Retirement SystemsPerimeter Park West1260 Louisville RoadFrankfort, Kentucky 40601

Kentucky Teachers’ Retirement System479 Versailles RoadFrankfort, Kentucky 40601

University of Louisville2301 South 3rd Street108 Grawemeyer HallLouisville, Kentucky 40292

Western Kentucky UniversityVice President for Finance and Administration1 Big Red WayBowling Green, Kentucky 42101-3576

Murray State University322 Sparks HallMurray, Kentucky 42071

Kentucky State UniversityOffice of Administrative Affairs400 East Main StreetFrankfort, Kentucky 40601

Kentucky Lottery Corporation1011 West Main StreetLouisville, Kentucky 40202-2623

Kentucky State Fair BoardKentucky Fair and Exposition CenterP.O. Box 37130Louisville, Kentucky 40233-7130

Kentucky Educational Television600 Cooper Drive Lexington, Kentucky 40502

Kentucky Higher Education Assistance Authority100 Airport Rd.Frankfort, Kentucky 40601

Kentucky Higher Education Student Loan CorporationFinancial Services Department10180 Linn Station Road, Suite C200Louisville, KY 40223

Kentucky Infrastructure Authority1024 Capital Center Dr., Suite 340Frankfort, Kentucky 40601

Kentucky Local Correctional Facilities Construction AuthoritySuite 261 Capitol AnnexFrankfort, Kentucky 40601

Kentucky Judicial Form Retirement SystemP.O. Box 791Frankfort, Kentucky 40602

University of Kentucky301 Peterson Service BuildingLexington, Kentucky 40506-0005

Eastern Kentucky UniversityVice President for Business Affairs521 Lancaster AvenueRichmond, Kentucky 40475-3101


137

Kentucky Horse Park Foundation4089 Iron Works ParkwayLexington, Kentucky 40511

Kentucky Public Transportation Infrastructure Authority 200 Mero Street, 6th Floor EastFrankfort, Kentucky 40622

Morehead State UniversityOffice of Accounting and Budgetary Control207 Howell-McDowell Administration BuildingMorehead, Kentucky 40351-1689

Northern Kentucky UniversityOffice of Business AffairsLucas Administration Center 726 Nunn DriveHighland Heights, Kentucky 41099-8101

Office of Public Employees Health InsuranceState Office Building, 2nd Floor501 High StreetFrankfort, KY 40601

Kentucky Community and Technical College System300 North Main StreetVersailles, KY 40383

Kentucky River Authority70 Wilkinson BoulevardFrankfort, Kentucky 40601

Council on Postsecondary Education1024 Capital Center Drive, Suite 320Frankfort, Kentucky 40601

Office of the Petroleum Storage TankEnvironmental Assurance Fund81 C. Michael Davenport BoulevardFrankfort, KY 40601

Kentucky Artisan Center at BereaP.O. Box 280Berea, KY 40403

Kentucky Public Employees’Deferred Compensation Authority101 Sea Hero Road, Suite 110Frankfort, KY 40601-5404

Workers’ Compensation ProgramState Office Building, 3rd Floor501 High StreetFrankfort, KY 40601

Kentucky Department of Labor – Special Fund1047 US Highway 127 S, Suite 4Frankfort, KY 40601


138


139

REQUIRED SUPPLEMENTARY INFORMATION OTHER THAN MANAGEMENT’S DISCUSSION AND ANALYSIS

140

COMMONWEALTH OF KENTUCKYSCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCEBUDGET AND ACTUAL (BUDGETARY BASIS) - GENERAL FUNDFOR THE YEAR ENDED JUNE 30, 2015(Expressed in Thousands)

OriginalRevenuesBudgeted:

Taxes $ 9,416,435 $ 9,416,435 $ 9,614,380 $ 197,945Licenses, fees, and permits 34,082 34,082 37,224 3,142Intergovernmental 36,517 36,517 9,540 (26,977)Charges for services 6,493 6,493 7,596 1,103Fines and forfeits 35,013 35,013 36,462 1,449Interest and other investment income 800 800 213 (587)Lottery proceeds 238,000 238,000 221,500 (16,500)Other revenues 33,888 33,888 39,716 5,828Tobacco Settlement 99,700 61,884 61,884

Subtotal of Budgeted Revenues 9,900,928 9,863,112 10,028,515 165,403Other Budgeted Financial Resources:

Transfers in (intrafund)Transfers in (interfund) 224,546 227,546 222,554 (4,992)

Total Budgeted Revenues 10,125,474 10,090,658 10,251,069 160,411

ExpendituresGeneral Government:

Executive Office of the Governor 5,528 5,528 5,528Office of Homeland Security 233 233 233Kentucky Infrastructure Authority 1,337 1,337 1,337Department of Veterans Affairs 17,799 17,799 17,799Office of State Budget Director 3,133 3,133 3,133State Planning Fund 151 151 151Unified Prosecutorial System:

Commonwealth Attorneys 44,536 44,536 44,536County Attorneys 38,653 38,653 38,653

Department of Agriculture 16,645 16,645 16,345 300Office of the Attorney General 10,438 10,570 10,570Auditor of Public Accounts 4,681 4,681 4,681Registry of Election Finance 1,201 1,200 1,200Military Affairs 9,347 16,850 15,328 1,522Governor's Office for Local Development 8,468 8,468 8,468Local Government:

Economic Assistance Fund 50,208 50,267 50,267Economic Development Fund 28,945 23,364 23,364Area Development Fund 474 474 474

Secretary of State 1,635 1,635 1,635Department of Treasury 1,778 1,778 1,778Board of Elections 4,027 4,049 4,049School Facilities Construction Commission 99,634 99,634 99,634Executive Branch Ethics Commission 455 455 455Commission on Human Rights 1,703 1,703 1,703Commission on Women 226 226 226Council on Postsecondary Education 46,653 46,653 45,457 1,196Budget Reserve Trust Fund 77,093 77,093 77,093

Personnel:State Group Health Insurance 960 960 960

Final Actual Variance

141 Continued

Original Final ActualUniversities:

Eastern Kentucky University $ 68,034 $ 68,034 $ 68,034 $Kentucky State University 23,430 23,430 23,430Morehead State University 41,040 41,040 41,040Murray State University 48,025 48,025 48,025Northern Kentucky University 48,538 48,538 48,538University of Kentucky 279,611 279,611 279,611University of Louisville 139,077 139,715 139,715Western Kentucky University 72,649 72,649 72,649Kentucky Community and Technical College System 190,162 190,162 190,162

Finance and Administration:General Administration and Support 9,794 9,794 8,294 1,500Special Accounts - Capital Construction 5,776 5,776 5,776Debt Service 425,440 425,440 395,182 30,258Office of the Controller 5,914 5,914 5,914Department for Facilities and Support Services 5,619 5,619 5,619Kentucky Higher Education Assistance Authority 207,506 207,506 198,978 8,528Special Accounts - Tobacco Settlement 101,880 61,884 61,884Finance - County Costs 15,897 21,615 21,477 138Department of Revenue:

General Operations 86,332 86,332 86,332Office of Property Valuation Administrators 42,343 42,343 42,343

Appropriations Not Otherwise Classified:Judgements 1,550 1,484 66Board of Claims Awards 235 658 658Guardian Ad Litem 2,389 12,704 12,704Prior Year Claims 104 50 50Unredeemed Checks Refunded 970 2,318 2,318Involuntary Commitments 60 64 64Blanket Employee Bonds 60 45 45Frankfort In Lieu of Taxes 195 195 195Frankfort Cemetery 3Police and Firemen Life Insurance 320 409 409Attorney General Expense 535 446 446Medical Malpractice Liability Insurance Reimbursements 155 118 118

Total General Government 2,298,034 2,280,059 2,159,458 120,601

Legislative and Judicial:General Assembly 27,236 27,236 18,328 8,908Legislative Research Commission 43,683 43,683 36,770 6,913Judicial Retirement System 16,917 16,917 16,917

Court of Justice - Court Facility Use 120 120 120Court of Justice - Operation and Administration 205,633 205,633 205,633Court of Justice - Local Facility Support 113,167 113,167 111,482 1,685

Total Legislative and Judicial 406,756 406,756 389,130 17,626

Variance

142

COMMONWEALTH OF KENTUCKYSCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCEBUDGET AND ACTUAL (BUDGETARY BASIS) - GENERAL FUNDFOR THE YEAR ENDED JUNE 30, 2015(Expressed in Thousands)

Original Final ActualCommerce:

Economic Development:Economic Development $ 19,611 $ 20,361 $ 20,318 $ 43

Commerce Cabinet:Office of the Secretary 2,544 2,544 2,544Breaks Interstate Park 400 400Kentucky State Fair Board 3,897 3,497 3,497Kentucky Horse Park 2,472 2,472 2,472Department of Parks 33,573 33,573 33,573Department of Travel 3,094 3,094 3,094Berea Artisans Center 389 389 389

Total Commerce 65,580 66,330 66,287 43

Education:General Administration and Program Support 4,434 4,434 4,434Commission on the Deaf and Hard of Hearing 861 861 861Kentucky Heritage Council 737 737 737Kentucky Arts Council 3,017 3,017 3,017Department of Education:

Support Education Excellence In KY (SEEK) 2,972,271 2,980,903 2,980,843 60Bureau of Support Services 48,761 35,053 35,053Learning Results Services 985,304 931,334 925,100 6,234

Kentucky Educational Television 13,038 13,038 13,038Kentucky Historical Society 5,785 5,785 5,785Kentucky Center for the Arts 1,031 1,031 1,031Education Professional Standards Board 7,307 7,307 7,307Libraries and Archives -

Direct Local Aid 6,326 2,996 2,996Public Library Facilities Construction Debt Assistance 3,330 3,330General Operations 6,118 6,118 6,118

Teachers' Retirement System 326,773 326,773 326,773Workforce Investment:

Office of the Blind 1,385 1,385 1,385Technical Education 15,529 15,529Vocational Rehabilitation 11,585 11,585 11,585

Total Education and Humanities 4,394,733 4,351,216 4,344,922 6,294

Human Resources:Health and Family Services:

Administrative Services 28,451 24,751 24,751Department for Community Based Services 391,635 391,635 391,635Department for Family Resource Centers and Volunteer Services 1,466Office of the Inspector General 3,700 3,700Office of Health Policy 448 448 448Department for Aging and Independent Living 44,703 44,703 44,703Department for Income Support 8,226 8,226 8,226Department for Public Health 68,820 68,820 68,089 731Department for Behavioral Health, Developmental and Intellectual Disabilities 202,605 202,605 198,605 4,000Department for Human Support Services 53,615 53,615Medicaid Administration 33,315 33,315 33,315Medicaid Services Benefits 1,525,524 1,525,524 1,525,518 6Commission for Children With Special Health Care Needs 5,402 5,402 5,402

Total Human Resources 2,310,595 2,362,744 2,358,007 4,737

Variance

143

Original Final ActualJustice:

Justice Administration $ 11,096 $ 11,096 $ 11,096 $Department of State Police 74,316 74,316 74,316Department of Juvenile Justice 81,508 81,508 81,508Department for Public Advocacy 46,314 46,314 46,314Department of Corrections:

Management 9,459 9,459 9,459Adult Institutions 244,856 258,706 258,706Local Jail Allotment 18,163 18,163 18,163

Community Services and Local Facilities 193,853 191,803 191,803Total Justice 679,565 691,365 691,365

Natural Resources and Environmental Protection:General Administration and Support 3,291 3,291 3,291Department for Energy Development and Independence 1,344 1,344 1,344Kentucky River Authority 251 251 251Kentucky Nature Preserves Commission 1,062 1,062 1,062Department for Environmental Protection 21,418 21,418 21,418Department for Natural Resources 32,883 17,456 17,456

Mine Safety and Licensing 9,703 9,703Surface Mining Reclamation and Enforcement 8,175 8,175Total Natural Resources and Environmental

Protection 60,249 62,700 62,700

Public Protection and Regulation:General Administration and Support 278 278 278Board of Claims and Crime Victims Compensation 696 696 696Board of Tax Appeals 464 464 464Horse Racing Commission 699 699 699Public Service Commission 17,508 17,508 9,620 7,888Mine Safety Review Commission 176 176Department of Alcoholic Beverage Control 608 608 608Department of Housing, Buildings, and Construction 2,455 2,455 2,455Labor:

Workplace Standards 1,789 1,789 1,789General Administration & Support 3,312 3,312 3,312

Total Public Protection and Regulation 27,809 27,985 20,097 7,888

Transportation:General Administration and Support 500 500 500Public Transportation 5,835 5,835 5,638 197Revenue Sharing 7,800 7,799

Total Transportation 6,335 14,135 13,937 197Total Expenditures 10,249,656 10,263,290 10,105,903 157,386

Excess of Revenues Over (Under) Expenditures (124,182) (172,632) 145,166 317,798Fund Balance at July 1 182,267 182,267 182,267Non-Budgeted Items (2,447)Fund Balance at June 30 $ 58,085 $ 9,635 $ 324,986 $

Variance

144

COMMONWEALTH OF KENTUCKYSCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCEBUDGET AND ACTUAL (BUDGETARY BASIS) - BUDGETED SPECIAL REVENUE FUNDSFOR THE YEAR ENDED JUNE 30, 2015(Expressed in Thousands)

Federal

RevenuesBudgeted:

Taxes $ 1,308,625 $ 1,308,625 $ 1,363,835 $ 55,210Licenses, fees, and permits 212,114 212,114 145,628 (66,486)Intergovernmental 7 7Charges for services 19,570 19,570 7,623 (11,947)Fines and forfeits 25 25Interest and other investment income 3,100 3,100 2,917 (183)Other revenues 3,291 3,291 6,739 3,448

Total Budgeted Revenues 1,546,700 1,546,700 1,526,774 (19,926)Non-Budgeted:

TaxesLicenses, fees, and permitsIntergovernmentalCharges for servicesFines and forfeitsInterest and other investment incomeEmployer contributionsOther revenuesTransfers in (interfund) 993 993 1,385 392Transfers in (intrafund)

Total Non-Budgeted Revenue 993 993 1,385 392Total Revenues 1,547,693 1,547,693 1,528,159 (19,534)

ExpendituresGeneral Government:

Executive Office of the GovernorOffice of Homeland Security 260 260 260Kentucky Infrastructure AuthorityOffice of State Budget DirectorExecutive Branch Ethics CommissionDepartment of Veterans AffairsUnified Prosecutorial System:

Commonwealth AttorneysCounty Attorneys

Department of AgricultureOffice of the Attorney GeneralAuditor of Public AccountsMilitary AffairsGovernor's Office of Agricultural Policy:

Agricultural Development - Statewide PhaseGovernor's Office for Local DevelopmentSecretary of State Department of Treasury 250 250 250Board of:

AccountancyAlcohol and Drug CounselorsAuctioneersBarberingChiropractic ExaminersHome InspectorsLicensed Diabetes EducatorsMedical Imaging and Radiation TherapyApplied Behavior Analysis LicensingProfessional CounselorsFee-Based Pastoral CounselorsInterpreters for Deaf & Hard of HearingProsthetics, Orthotics and PedorthicsDentistryDietitians and NutritionistsElectionsEmbalmers and Funeral Home DirectorsArchitectsLandscape ArchitectsExaminers of Psychologists

TransportationOriginal Final Actual Variance

145 Continued

Federal Agency Revenue

$ $ $ $ $ $ $ $

319,74226 188,926

9,610,663 49,8551,233 4,111,851

7,44981 10,380

(162)88,354 374,638

51 707,7333,101,736

9,700,408 8,872,1489,700,408 8,872,148

1,351 1,361 980 381 111 221 218 34,858 4,858 4,255 603 2,040 2,040 1,206 834

29,369 29,369 28,847 522 37,381 37,381 1,227 36,154140 273 27376 108 108

40,914 46,114 46,051 63

46 46 32 14 1,658 1,658 1,214 444567 567 514 53 379 379 379

5,496 6,668 5,728 940 10,024 10,024 7,404 2,6203,725 3,725 2,986 739 9,873 9,873 7,396 2,477

8,082 8,082 7,876 20643,155 83,155 79,937 3,218 44,743 44,743 28,400 16,343

844 844 473 37141,131 41,131 36,859 4,272 1,299 1,299 1,010 289

80 80 61 19 1,717 1,717 1,194 5231,238 1,238 1,034 204

552 552 469 8382 82 79 3

389 389 338 51322 347 314 33318 340 328 1284 84 82 21 10 7 3

393 393 236 15716 16 14 2

185 205 197 84 4 2 2

38 38 33 546 59 57 2

894 894 733 16174 74 66 8

5,211 5,211 794 4,417 246 246 22 224403 418 418436 436 401 3565 65 65

236 236 230 6

Original Final Actual Variance Original Final Actual Variance

146


Federal

Board of: (Continued)Examiners of Social Workers $ $ $ $Hairdressers and CosmetologistsHearing Instrument SpecialistsNursing Home Administrators LicensingMedical LicensureNursingOphthalmic DispensersOptometric ExaminersArt TherapistsOccupational TherapyRespiratory Care PractitionersMarriage and Family TherapistsEmergency Medical ServicesGeologistsPersonnelPharmacyPhysical TherapistsPodiatryEngineers and Land SurveyorsSpeech Pathology and AudiologyVeterinary ExaminersInvestigatorsMassage Therapy

Real Estate Commission Board of Real Estate AppraisersCommission on Human RightsCouncil on Postsecondary Education

Personnel: General OperationsPublic Employee Deferred Compensation Authority

Universities:Eastern Kentucky UniversityKentucky State UniversityMorehead State UniversityMurray State UniversityNorthern Kentucky UniversityUniversity of KentuckyUniversity of LouisvilleWestern Kentucky UniversityKentucky Community and Technical College System

Finance and Administration:General Administration and Support 423 423 423Office of the ControllerCommonwealth Office of TechnologyKentucky Higher Education Assistance AuthorityTurnpike Authority of KentuckyFinance - County Costs Kentucky Retirement SystemsDepartment of Revenue:

General Operations 2,475 2,475 2,475Office of Property Valuation Administrators 437 437 437

Department for Facilities and Support ServicesTotal General Government 3,845 3,845 3,845


147 Continued


$ $ $ $ $ 276 $ 293 $ 279 $ 141,375 1,375 1,298 77

81 81 56 2561 61 59 2

2,940 2,940 2,860 806,201 6,201 5,542 659

55 55 48 7207 207 197 1011 11 11

147 167 149 18207 207 198 9116 126 113 13

107 107 92 15846 846 770 76

1,639 1,746 1,746469 523 52339 39 39

1,312 1,312 1,237 75170 170 157 13278 278 210 68102 102 68 34169 186 183 3

2,106 2,106 1,986 120757 757 717 40

245 563 461 10218,074 18,652 13,539 5,113 6,022 6,022 4,715 1,307

52,631 26,945 26,943 29,112 9,112 7,758 1,354

275,768 275,768 274,116 1,65253,321 53,321 32,878 20,443

203,976 203,976 87,288 116,688132,121 132,121 119,052 13,069209,505 209,505 167,882 41,623

2,526,560 2,526,560 2,056,606 469,9541,088,209 1,088,209 195,667 892,542

326,996 326,996 235,200 91,796762,915 762,915 244,094 518,821

3,177 3,177 239 2,938 4,946 4,946 3,760 1,1867,104 7,104 6,310 794

1,991 1,991 1,399 592 1,050 2,000 1,993 759 59 6 53 28,395 28,700 28,676 24

102 102 78 241,703 1,703 1,495 208

40,931 40,931 31,074 9,857

14,065 15,080 12,952 2,1285,089 4,796 293

1,321 1,321 1,111 210158,535 200,613 176,637 23,976 5,931,727 5,919,204 3,672,536 2,246,668


148


Federal

Legislative and Judicial:General Assembly $ $ $ $Legislative Research CommissionJudicial Retirement SystemCourt of Justice - Operation and Administration

Total Legislative and Judicial

Commerce:Economic Development:

Office of the SecretaryFinancial IncentivesBusiness Development

Commerce: Office of the SecretaryDepartment of ParksDepartment of TravelBerea Artisans Center 393 393 393Department of Fish and Wildlife ResourcesTotal Commerce 393 393 393

Education:Commission on the Deaf and Hard of HearingEnvironmental Education CouncilKentucky Heritage CouncilKentucky Arts CouncilGeneral Administration and Program SupportDepartment of Education:

Learning Results ServicesBureau of Support Services

Kentucky Educational TelevisionKentucky Historical SocietyCommission on Proprietary EducationEducation Professional Standards BoardLibraries and Archives:

Direct Local AidGeneral Operations

Kentucky Teachers' Retirement SystemWorkforce Investment:

Office of the BlindEmployment and TrainingVocational Rehabilitation

Total Education and Humanities


149 Continued


$ $ $ $ $ 714 $ 764 $ $ 7641 1 1 1,836 1,786 1,786

300 192 1081,398 5,698 3,567 2,131 64,034 64,034 42,387 21,6471,399 5,699 3,567 2,132 66,584 66,884 42,579 24,305

530 213 317 50 4,061 3,530 5312,049

61312,910 12,910 12,705 205

50 50 37 1345 45 17 28

1,583 1,633 1,618 1517,895 17,895 14,233 3,662 34,724 35,284 34,917 36717,895 18,425 14,446 3,979 52,024 53,983 52,824 1,159

1,109 1,559 1,404 155240 350 348 2

815 815 804 11 262 262 234 28760 760 711 49 152 152 123 29660 660 550 110 5,131 5,361 4,870 491

559,363 559,363 477,383 81,980 24,578 24,578 20,580 3,998328,485 328,485 324,183 4,302 8,200 8,200 2,230 5,970

1,451 1,451 1,264 187537 537 163 374 458 668 656 12

272 272 114 158201 1,040 351 689 1,723 1,723 1,718 5

557 557 186 371 896 896 592 3042,148 2,148 1,348 800 3,483 3,483 2,548 935

12,184 12,184 10,742 1,442

7,243 7,243 7,058 185 1,176 1,176 1,099 77136,309 136,309 95,915 40,394 30,158 30,158 24,744 5,41444,567 47,731 47,707 24 3,140 5,785 4,977 808

1,081,645 1,085,648 956,359 129,289 94,613 98,258 78,243 20,015


150


Federal

Human Resources:Health and Family Services:

Administrative Support $ $ $ $Office of Health Benefit ExchangeDepartment for Disability Determination ServicesDepartment for Community Based ServicesDepartment for Family Resources and Volunteer ServicesOffice of Inspector GeneralOffice of Health PolicyDepartment for Aging and Independent LivingDepartment of Income SupportDepartment for Public HealthDepartment for Behavioral Health, Developmental

and Intellectual DisabilitiesMedicaid AdministrationMedicaid Services BenefitsCommission for Children with Special

Health Care NeedsDepartment for Human Support Services

Total Human Resources

Justice:Office of the SecretaryDepartment of State Police 95,746 95,746 95,746Department for Public AdvocacyDepartment of Juvenile JusticeDepartment of Criminal Justice TrainingDepartment of Corrections:

ManagementAdult Correctional InstitutionsCommunity Service and Local FacilitiesTotal Justice 95,746 95,746 95,746

Natural Resources and Environmental Protection:General Administration and SupportDepartment for Energy Development and IndependenceKentucky River AuthorityEnvironmental Quality CommissionKentucky Nature Preserves CommissionDepartment for Environmental Protection 316 316 316Department for Natural Resources

Mining Safety and LicensingSurface Mining Reclamation and EnforcementAbandoned Mine Lands Reclamation ProjectsTotal Natural Resources and

Environmental Protection 316 316 316

Public Protection and Regulation:Office of the CommissionerBoard of Claims and Crime Victims CompensationHorse Racing CommissionKentucky Athletic CommissionPublic Service CommissionOccupations and ProfessionsDepartment of Alcoholic Beverage ControlDepartment of Charitable GamingDepartment of Financial InstitutionsDepartment of Housing, Buildings, and ConstructionDepartment of InsuranceLabor: Workplace Standards

General Administration & SupportTotal Public Protection and Regulation


151 Continued


$ 37,526 $ 33,726 $ 26,188 $ 7,538 $ 13,866 $ 13,186 $ 12,418 $ 76819,916 58,341 55,776 2,565 14,021 14,121 4,748 9,37346,327 46,327 43,793 2,534 121 126 125 1

492,199 492,199 451,832 40,367 150,258 151,964 139,013 12,95141 41 41

13,047 15,047 13,653 1,394 4,880 4,675 205250 250 810 810 397 413

24,829 26,529 21,127 5,402 2,869 4,719 2,848 1,87132,091 32,091 31,013 1,078 15,860 16,355 16,352 3

199,917 199,917 181,008 18,909 97,016 97,016 66,632 30,384

38,661 38,661 36,594 2,067 227,449 236,949 200,576 36,37377,311 78,051 78,043 8 16,770 16,770 15,897 873

5,914,098 7,714,098 7,609,302 104,796 500,155 513,055 505,819 7,236

4,566 4,566 4,474 92 6,971 6,971 6,475 4963,069 5,069 4,990 79

6,903,557 8,744,872 8,558,043 186,829 1,046,207 1,076,963 976,016 100,947

11,136 11,136 9,590 1,546 3,894 3,894 3,574 32011,562 13,367 13,159 208 22,704 22,704 21,610 1,0941,320 1,816 1,600 216 3,178 3,238 3,238

11,705 12,400 12,400 10,490 13,805 13,805188 188 105 83 52,052 52,052 51,562 490

305 305 142 163 300 300 262 381,805 1,805 767 1,038 17,253 5,586 3,698 1,888

963 1,668 1,352 316 5,830 5,830 2,820 3,01038,984 42,685 39,115 3,570 115,701 107,409 100,569 6,840

1,075 1,148 968 180 1,816 1,541 275622 842 641 201 2,550 3,400 3,388 12

5,460 5,460 3,298 2,1621,194 202 197 5

55 297 264 33 370 370 321 4923,703 23,703 21,543 2,160 37,136 39,497 35,074 4,423

4,329 2,593 1,7364,804 4,804 2,819 1,985 866 572 294

10,446 10,456 9,488 968 4,674 2,264 1,629 63540,841 40,831 32,863 7,968 10,925 8,080 1,980 6,100

81,546 82,081 68,586 13,495 62,309 66,284 50,593 15,691

1,382 4,449 4,101 348450 450 450 1,027 1,027 960 67

28,357 28,357 24,533 3,824167 167 129 38

228 528 445 83 223 223 43 1804,449 1,382 1,153 2295,820 5,820 4,926 8943,474 3,474 2,919 555

10,612 10,612 9,532 1,08013 13 18,124 18,124 16,782 1,342

1,066 1,066 486 580 17,414 17,414 14,529 2,8853,873 3,873 3,715 158

232 263 49 214 3,080 3,080 2,456 6245,849 6,193 5,145 1,048 94,129 94,129 82,063 12,066

Variance Final Actual Variance Original Final ActualOriginal

152


Federal

Transportation:Administration and Support $ 70,871 $ 70,872 $ 68,610 $ 2,262Revenue Sharing 519,383 505,669 390,411 115,258Air Transportation 3,020 3,019 2,582 437HighwaysPublic Transportation 1,315,321 1,315,321 981,504 333,817Vehicle Regulation 31,770 31,770 25,280 6,490Debt Service 154,035 154,035 149,596 4,439Transfers to Capital Projects 9,733 9,733 6,750 2,983BRAC Economic Development Road BondsGARVEE Louisville Bridges Project BondsGARVEE Western KY Bridges Project2005 GARVEE Bond Series2005 Ed Bond SeriesLSIORB TIFIA LoanLSIORB Toll Revenue Bonds

Total Transportation 2,104,133 2,090,419 1,624,733 465,686Total Expenditures 2,204,433 2,190,719 1,725,033 465,686Excess of Revenues over (under)

Expenditures (656,740) (643,026) (196,874) 446,152

Other Financing Sources (Uses)Proceeds from Trustees

Total Other Financing Sources (Uses)

Excess of Revenues and Other FinancingSources over (under) Expenditures andOther Financing Uses (656,740) (643,026) (196,874) 446,152

Fund Balances at July 1 653,749 653,749 653,749Non-Budgeted Items (1,311)

Fund Balances at June 30 $ (2,991) $ 10,723 $ 455,564 $

Original Final Actual Variance Transportation

153


$ 25,341 $ $ $ $ 1,989 $ 20 $ $ 20484

989 989 287 702 18,507 18,507 8,022 10,485715,656 1,347,146 735,540 611,606 518,646 98,295 68,404 29,891649,206 43,057 23,883 19,174 617 617

2,869 4,600 3,927 673 11,556 14,497 11,493 3,004

967 31,103 1,887 29,216347 24,145 14,738 9,407

495,123 327,221 86,349 240,87269,111 5,403 1,311 4,09228,917 359,041 100,795 258,246

250,000 399,000 170,940 228,060118,902 88,004 30,898

1,394,061 1,395,792 763,637 632,155 1,395,647 1,396,751 552,560 844,1919,683,471 11,582,008 10,585,535 996,473 8,858,941 8,879,865 5,607,983 3,271,882

(885,127) 3,264,165

1,1271,127

(885,127) 3,265,2921,104,635 2,086,923

(9,579) (3,554,599)$ $ $ 209,929 $ $ $ $ 1,797,616 $

Actual Variance Original Final Actual Variance Original Final

154

COMMONWEALTH OF KENTUCKYNotes To Required Supplementary InformationJune 30, 2015

Budgetary Reporting

The Commonwealth of Kentucky requires that each branch of government prepare and submit a recommended budget to the General Assembly for each of the two fiscal years to be included in a biennial budget. These budgets are prepared principally on the cash basis. The Legislature reviews these budget requests, makes any necessary revisions, and legally adopts a biennial budget for each of the three branches of government. The Governor has the power to approve or veto each bill, subject to legislative override.

The financial plan for each fiscal year, as presented in a branch budget recommendation, shall be adopted with such modifica-tions as made by the General Assembly (and explained in a budget memorandum) by the passage of the budget bill and such revenue and other acts necessary for the purpose.

Budgetary control is maintained at the budget unit level as desig-nated by the budget bills enacted by the General Assembly (i.e., function, major program area, program, or unit of organization).

Appropriations for the General Fund and Road Fund shall be based upon revenue estimates prepared by the Consensus Forecasting Group and modifications made by the appropriations committee of the General Assembly. Official revenue estimates are not made for the other budgetary funds.

The Major Governmental funds, which have legally adopted an-nual budgets as part of the primary government, include the fol-lowing: General, Transportation, Federal, and Agency Revenue.

The funds allotted for each purpose of expenditure shall be used for no other purpose, except when the head of any budget unit, with the approval of the Secretary of the Finance and Adminis-tration Cabinet, may transfer allotted funds from one purpose of expenditure to another within the budget unit. No revisions of the allotment schedule may provide for an allotment or allotments in excess of the amount appropriated to that budget unit in a budget bill or for expenditure for any other purpose not contemplated in a budget bill. However, appropriations for budgetary funds other than the General Fund and the Transportation Fund may be amend-ed upon approval by the State Budget Director and the Secretary of the Finance and Administration Cabinet.

Encumbrance accounting is utilized for budgetary control purpos-es. Encumbrances outstanding at year end for long-term construc-tion contracts reported in the Capital Projects Fund and Transpor-tation Fund are reported as restricted budgetary fund balance. All other encumbered and unencumbered appropriations lapse at the end of each fiscal year. Encumbrances are carried forward as revi-sions to appropriations.

The annual budget is prepared principally on the cash basis, which differs from generally accepted accounting principles (GAAP). A reconciliation between the budgetary basis and the GAAP basis is presented in the notes to the Required Supplemental Information section as follows.

155


Budgetary Basis vs. GAAP

Accounting principles applied for purposes of developing data on budgetary basis differ significantly from those used to present financial statementsin conformity with generally accepted accounting principles. A schedule reconciling the fund balance on a cash basis at June 30, 2015, to the fund balance on a modified accrual basis follows :

(Expressed in Thousands)Agency

Financial statement funds General Transportation Federal Revenue(same as budgetary funds) Fund Fund Fund Fund

Fund balanceJune 30, 2015:

Budgetary basis $ 324,986 $ 455,565 $ 209,929 $ 1,797,616

Adjustments:Accrued revenues 374,334 142,217 808,967 61,533

Accrued expenditures (494,399) (117,586) (922,307) (51,887)

Accrued transfers (net) (10,838) 10,838

Total Accruals (1) (120,065) 24,631 (124,178) 20,484

Reclassifications and other adjustments:Inventory balances (1) 6,230 64,191 277 2,880

To reclassify financial and other resourcesinto financial statement fund types (2) 21 (854) (145,432) (1,264,203)

To record financial resources availableas non-budgeted funds (3) (106,813)

Fund BalanceFund balance June 30, 2015:

GAAP Basis $ 104,359 $ 543,533 $ (59,404) $ 556,777

(1) Basis differences(2) Perspective differences(3) Entity differences

156


Infrastructure Assets Reported Using the Modified Approach

As allowed by GASB Statement No. 34, Basic Financial State-ments – and Management’s Discussion and Analysis – for State and Local Governments, the Commonwealth has adopted an alterna-tive process for recording depreciation expense on selected infra-structure assets. Under this alternative method, referred to as the modified approach, the Commonwealth expenses certain mainte-nance and preservation costs and does not report depreciation ex-pense. Assets accounted for, under the modified approach, include approximately 64,187 lane miles of roads and approximately 9,011 bridges that the Commonwealth is responsible to maintain.

In order to utilize the modified approach, the Commonwealth is required to:

• Maintain an asset management system that includes an up-to-date inventory of eligible infrastructure assets.• Perform condition assessments of eligible assets and summarize the results using a measurement scale.• Estimate, each year, the annual amount to maintain

and preserve the assets at the condition level established and disclosed by the Commonwealth.

• Document that the assets are being preserved approximately at, or above, the established condition level.

Pavements

Measurement ScaleThe Kentucky Transportation Cabinet (KYTC) uses numerous methods to determine the condition of roadway pavements; includ-ing, the Pavement Condition Index (PCI) to measure and monitor pavement conditions. In use since the mid-1980s, the PCI for any particular pavement section is the mathematical difference be-tween the current pavement smoothness and the acceptable pave-ment smoothness threshold based on traffic volumes. The corre-sponding pavement condition is based on the following PCI ranges:

Condition PCI

Good Greater than +0.4 Fair Between 0.0 and 0.4 Poor Less than 0.0

Established Minimum Condition LevelNo more than 30% of the pavements shall be rated as “poor.”

Assessed ConditionsThe Commonwealth assesses pavement condition on a calendar year basis. The following table reports the percentage of pave-ments meeting ratings of “Good”, “Fair”, and “Poor” for the past five years.

Condition 2014 2013 2012 2011 2010

Good 56.4% 53.7% 56.6% 59.3% 62.4%

Fair 26.2% 27.0% 24.7% 21.6% 22.6%

Poor 17.4% 19.3% 18.7% 19.1% 15.0%

Bridges

Measurement ScaleKYTC maintains information on its 9,011 bridges in compliance with the National Bridge Inspection guidelines established by the Federal Highway Administration. KYTC inspects all bridges at least once every two years and the condition assessment results are coded on a 0-9 scale with 9 being the most desirable. The condition ratings are based on the following scale:

Rating Description

9 Excellent.8 Very good.7 Good. Some minor problems.6 Satisfactory. Structural elements show some minor deterioration.5 Fair. All primary structural elements are sound but may have minor section loss, cracking, spalling or scour.4 Poor. Advanced section loss, deterioration, spalling or scour.3 Serious. Loss of section, deterioration, spalling, or scour have seriously affected primary structural components. Local failures are possible. Fatigue cracks in steel or shear cracks in concrete may be present.2 Critical. Advanced deterioration of primary structural elements. Fatigue cracks in steel or shear cracks in concrete may be present or scour may have removed substructure support. Unless closely monitored, it may be necessary toc lose the bridge until corrective action is taken.1 Imminent failure. Major deterioration or section loss present in critical structural components or obvious vertical or horizontal movement affecting structure stability. Bridge is closed to traffic, but corrective action may put it back inlight service.0 Failure. Out of service; beyond corrective action.

Established Minimum Condition Level

No more than 10% of the bridges shall be rated as “structurally deficient.” In addition, the total deck area of structurally deficient, state maintained bridges will not exceed 12% of the total deck area of all state maintained bridges.

157


Assessed ConditionsA bridge coded 4 or less for its deck, superstructure, or substruc-ture, or coded 2 or less for its structural evaluation or waterway adequacy is classified as “structurally deficient.” A structur-ally deficient bridge is inadequate to carry legal loads, whether caused by structural deterioration, obsolete design standards, or an insufficient waterway opening. A bridge coded 3 or less for its structural evaluation, deck geometry, vertical or horizontal un-der clearance, water adequacy, or approach roadway alignment is classified as “functionally obsolete.” A functionally obsolete bridge cannot properly accommodate the current traffic. The fol-lowing table reports the percentage of bridges whose condition was assessed as “structurally deficient” in the corresponding year:

Deck AreaCalendar Year Structurally Deficient Structurally Deficient 2014 6.3% 4.7% 2013 6.9% 4.9% 2012 6.5% 6.4% 2011 6.6% 6.9% 2010 7.0% 6.5%

Roadways Bridges TotalFiscal Year 2016:Estimated $ 1,064.9 $ 55.2 $ 1,120.1

Fiscal Year 2015:Estimated $ 1,103.0 $ 57.2 $ 1,160.2 Actual 1,136.3 53.2 1,189.5

Fiscal Year 2014:Estimated $ 1,030.6 $ 84.9 $ 1,115.5 Actual $ 1,060.7 $ 55.0 $ 1,115.7

Fiscal Year 2013:Estimated $ 951.1 $ 112.7 $ 1,063.8 Actual * $ 1,009.4 $ 73.5 $ 1,082.9

Fiscal Year 2012:Estimated $ 839.2 $ 103.1 $ 942.3 Actual * $ 1,009.5 $ 81.1 $ 1,090.6

Fiscal Year 2011:Estimated $ 872.3 $ 108.9 $ 981.2Actual * $ 855.2 $ 79.2 $ 934.4

Fiscal Year 2010:Estimated $ 809.4 $ 103.1 $ 912.5Actual * $ 838.4 $ 94.9 $ 933.3

* Prior year actual expenditures have been restated.

Estimated and Actual Costs to Maintain

The following table presents the Commonwealth’s estimate of spending necessary to preserve and maintain the pavements, bridges, and maintenance condition at, or above, the “Established Condition Levels” cited above and the actual amount spent during the past six fiscal years (in millions):

158


Kentucky Public Transportation Infrastructure Authority

As allowed by GASB Statement No. 34, Basic Financial State-ments – and Management’s Discussion and Analysis – for State and Local Governments, the Authority has adopted an alterna-tive process for recording depreciation expense on selected infra-structure assets. Under this alternative method, referred to as the modified approach, the Authority expenses certain maintenance and preservation costs and does not report depreciation expense.

In order to utilize the modified approach, the Authority is required to:

• Maintain an asset management system that includes an up-to-date inventory of eligible infrastructure assets.

• Perform condition assessments of eligible assets and summa-rize the results using a measurement scale.

• Estimate, each year, the annual amount to maintain and pre-serve the assets at the condition level established and disclosed by the Authority.

• Document that the assets are being preserved approximately at, or above, the established condition level.

The Authority’s assets accounted for, under the modified approach, include approximately 15.9 lane miles of roads and 24 bridge structures. As the developer for the LSIORBP, as designated in House Bill 2 enacted by the Kentucky General Assembly in 2012, the Authority is responsible for maintaining the assets. The Au-thority’s pavement condition assessments will be relaxed during construction; however, bridge inspections will continue until ac-cess to structures in restricted by the construction activities. Once the LSIORB is complete, it is planned the Authority and the Cab-inet will enter into a memorandum of agreement through which the Cabinet will resume responsibility for condition inspections, maintenance and preservation activities on behalf of the Authority.

Pavements

Measurement ScaleThe Authority uses numerous methods to determine the condition of roadway pavements; including the Pavement Condition Index (PCI) to measure and monitor pavement conditions. In use since the mid-1980s, the PCI for any particular pavement section is the mathematical difference between the current pavement smooth-ness and the acceptable pavement smoothness threshold based on traffic volumes. The corresponding pavement condition is based on the following PCI ranges:

Condition PCI

Good Greater than +0.4 Fair Between 0.0 and 0.4 Poor Less than 0.0

Established Minimum Condition LevelNo more than 30% of the pavements shall be rated as “poor.”

Assessed ConditionsThe Authority received the title to the 15.9 lane miles of road-ways during the year ended June 30, 2015. As the roadways were received during the fiscal year, pervious condition assessments have been reported by the Cabinet. The condition assessment at the time of conveyance met or exceeded the Cabinet’s established minimum condition level. The pavement condition goal above represents the Cabinet’s goal for the Commonwealth’s state main-tained highway system. The actual conditions of the pavements for which the Authority is responsible may or may not meet this stated goal for the reporting period due to delayed preservation activities. The LSIORBP has required a lengthy planning and de-velopment period and in anticipation of the reconstruction of the assets much of the preservation work has been postponed; thus, pavement conditions may temporarily be below the statewide con-dition goal. Routine pavement inspections have continued and required maintenance has been performed prior to construction to insure that payments are safe and reliable. Once construction is complete, the Authority will work with the Cabinet to adopt pay-ment condition goals for the LSIORBP assets.

Bridges

Measurement ScaleThe Authority maintains information on its bridges in compliance with the National Bridge Inspection guidelines established by the Federal Highway Administration. The Authority inspects all bridges at least once every two years and the condition assessment results are coded on a 0-9 scale with 9 being the most desirable. The condition ratings are based on the following scale:

Rating Description

9 Excellent8 Very Good.7 Good. Some minor problems.6 Satisfactory. Structural elements show some minor deterioration.5 Fair. All primary structural elements are sound but may have minor section loss, cracking, spalling or scour.4 Poor. Advanced section loss, deterioration, spalling or scour.3 Serious. Loss of section, deterioration, spalling, or scour have seriously affected primary structural components. Local failures are possible. Fatigue cracks in steel or shear cracks in concrete may be present.2 Critical. Advanced deterioration of primary structural elements. Fatique cracks in steel or shear cracks in concrete may be present or scour may have removed substructure support. Unless closely monitored, it may be necessary to close the bridge until corrective action is taken.

159


1 Imminent failure. Major deterioration or section loss present in critical structural components or obvious vertical or horizontal movement affecting structure stability. Bridge is closed to traffic, but corrective action may put it back in light service.0 Failure. Out of service, beyond corrective action.

Established Minimum Condition LevelNo more than 10% of the bridges shall be rated as “structurally deficient.” In addition, the total deck area of structurally deficient, state maintained bridges will not exceed 12% of the total deck area of all state maintained bridges.

Assessed ConditionsA bridge coded 4 or less for its deck, superstructure, or substruc-ture, or coded 2 or less for its structural evaluation or waterway adequacy is classified as “structurally deficient.” A structurally de-ficient bridge is inadequate to carry legal loads, whether caused by structural deterioration, obsolete design standards, or an insuffi-cient waterway opening. A bridge coded 3 or less for its structural evaluation, deck geometry, vertical or horizontal underclearance, water adequacy, or approach roadway alignment is classified as “functionally obsolete.” A functionally obsolete bridge cannot properly accommodate the current traffic. The following table re-ports the percentage of bridges whose condition was assessed as “structurally deficient” in the corresponding year: Deck AreaCalendar Year Structurally Deficient Structurally Deficient 2015 43% 42% The bridge condition goals above represent the Cabinet’s goal for all structures located on the Commonwealth’s state maintained highway system. The actual conditions of the bridges for which the Authority is responsible do not meet this stated goal for the reporting period. The LSIORBP has required a lengthy planning and development period and in anticipation of the construction ac-tivities much of the needed preservation work has been postponed. Construction activities are well underway and will either fully pre-serve or replace all existing bridge structures, restoring the asset’s conditions to above goal levels. During construction routine in-spections and conditions assessments have continued and required maintenance has been performed to insure all bridges are safe for traffic. Once construction is completed, the Authority will work with the Cabinet to adopt bridge condition goals for the LSIORBP assets. The Authority received the title to the bridges during the year ended June 30, 2015 and as such historical condition assess-ments are not reported by the Authority.

Estimated and Actual Costs to Maintain

The following table presents the Authority’s estimate of spending necessary to preserve and maintain the pavements, bridges, and maintenance condition at, or above, the “Established Condition Levels” cited above and the actual amount spent during the past fiscal years (thousands): Roadways Bridges Total

Fiscal Year 2015: Estimated $ 4,913 $ 0 $ 4,913

Note: A total of approximately $65,527,000 was spent on pres-ervation costs for roadways related to the LSIORBP assets by all Commonwealth parties. Estimated costs for roadways was not developed for the year ended 2015 by the Authority as the date of transfer of assets was uncertain. There were no preservation costs incurred for bridges during the year ended June 30, 2015.

160

COMMONWEALTH OF KENTUCKYREQUIRED SUPPLEMENTARY INFORMATIONENTITY RISK POOLSCLAIMS DEVELOPMENT INFORMATIONFOR THE LAST TEN YEARS(Expressed in Thousands)

State Workers' Compensation Program

Earned Premiums $ 24,812 $ 23,395 $ 24,293 $ 21,764 $ 23,666 $ 22,094 $ 22,993 $ 24,500 $ 24,497 $ 23,017

Administrative Expense 1,149 1,127 1,070 1,094 936 1,031 1,013 955 1,038 1,007

Incurred Claims asOriginally Estimated 19,493 18,161 16,765 21,006 19,084 20,372 21,269 23,043 25,619 24,847

Claims Paid (Cumulative) as of:End of Fiscal Year 4,131 4,898 4,078 4,907 4,613 5,497 5,245 5,076 7,314 6,221One Year Later 7,862 8,716 7,585 8,252 8,675 9,233 9,568 7,927 10,235Two Years Later 9,632 10,947 9,316 9,328 10,433 11,153 11,806 9,695Three Years Later 10,873 12,259 10,364 10,065 11,489 12,309 13,296 Four Years Later 11,609 12,981 11,115 10,319 12,067 13,390Five Years Later 12,126 13,899 11,592 10,514 12,506Six Years Later 12,663 14,407 12,052 10,716Seven Years Later 13,110 14,966 12,473Eight Years Later 13,549 15,460Nine Years Later 13,892

Re-estimation of Incurred Claims:End of Fiscal Year 19,493 18,161 16,765 21,006 19,084 20,372 21,269 23,043 25,619 24,847One Year Later 17,769 19,152 17,770 19,270 20,373 21,613 22,466 20,463 23,517Two Years Later 17,758 20,192 17,851 18,313 20,170 21,966 23,455 19,660Three Years Later 18,338 20,618 18,483 18,183 21,106 22,550 23,631 Four Years Later 18,755 21,460 19,849 17,847 21,236 23,060Five Years Later 19,417 22,379 20,188 17,579 21,148Six Years Later 19,931 22,906 19,975 17,289Seven Years Later 20,288 23,144 19,751Eight Years Later 20,055 22,997Nine Years Later 19,706

Increase (Decrease) in EstimatedIncurred Claims From the

Original Estimate Using Re-estimation at the End of theMost Recent Fiscal Year 213 4,836 2,986 (3,717) 2,064 2,688 2,363 (3,383) (2,102)

SOURCE: Compilation Report

2006 2011 2012 2013 2014 20152007 2008 2009 2010

161

COMMONWEALTH OF KENTUCKYREQUIRED SUPPLEMENTARY INFORMATIONENTITY RISK POOLSCLAIMS DEVELOPMENT INFORMATIONFOR THE LAST TEN FISCAL YEARS(Expressed in Thousands)

Kentucky Public Employees Health Plan

Earned Premiums $ 578,263 $ 1,091,702 $ 1,191,248 $ 1,310,553 $ 1,466,303 $ 1,571,312 $ 1,600,787 $ 1,597,599 $ 1,606,992 $ 1,612,540

Administrative Expense 28,998 57,782 68,883 72,836 77,104 81,048 82,088 81,459 87,108 83,049

Incurred Claims asOriginally Estimated 467,315 1,042,931 1,164,712 1,292,059 1,391,340 1,475,301 1,531,838 1,530,199 1,460,930 1,347,112

Claims Paid (Cumulative) as of:End of Fiscal Year 398,456 970,764 1,089,989 1,264,866 1,318,824 1,391,375 1,445,035 1,539,862 1,367,500 1,275,354One Year Later 473,766 1,035,700 1,173,449 1,290,727 1,399,923 1,477,129 1,533,569 1,537,204 1,477,144Two Years Later 473,046 1,043,837 1,173,366 1,289,633 1,396,976 1,466,785 1,532,732 1,537,204Three Years Later 475,709 1,043,442 1,169,819 1,289,628 1,396,631 1,466,629 1,532,537 Four Years Later 475,656 1,043,442 1,169,814 1,289,628 1,396,631 1,466,785Five Years Later 475,656 1,043,442 1,169,814 1,289,628 1,396,631Six Years Later 475,656 1,043,442 1,169,814 1,289,628Seven Years Later 475,656 1,043,442 1,169,814Eight Years Later 475,656 1,043,442Nine Years Later 475,656

Re-estimation of Incurred Claims:End of Fiscal Year 467,315 1,042,931 1,164,712 1,292,059 1,391,340 1,475,301 1,531,838 1,530,199 1,460,930 1,347,112One Year Later 473,872 1,035,976 1,173,890 1,289,389 1,398,877 1,474,723 1,532,352 1,537,907 1,474,433Two Years Later 473,046 1,043,923 1,173,323 1,289,628 1,396,631 1,466,629 1,532,537 1,536,507Three Years Later 475,715 1,043,442 1,169,814 1,289,628 1,396,631 1,466,629 1,532,537 Four Years Later 475,656 1,043,442 1,169,814 1,289,628 1,396,631 1,466,629Five Years Later 475,656 1,043,442 1,169,814 1,289,628 1,396,631Six Years Later 475,656 1,043,442 1,169,814 1,289,628Seven Years Later 475,656 1,043,442 1,169,814Eight Years Later 475,656 1,043,442Nine Years Later 475,656

Increase (Decrease) in EstimatedIncurred Claims From the

Original Estimate Using Re-estimation at the End of theMost Recent Fiscal Year 8,341 511 5,101 (2,431) 5,291 (8,673) 699 6,308 13,503

** January 1, 2006 was the Plan's inception date. This information is for the period ended 2006 and represents six months of data.

SOURCE: Audited Financial Statements

2006** 201520142011

as restated 2012 20132007 2008 2009 2010

162

COMMONWEALTH OF KENTUCKY REQUIRED SUPPLEMENTARY INFORMATIONSCHEDULE OF CONTRIBUTIONS - PENSIONFOR THE LAST TEN FISCAL YEARS(Expressed in Thousands)

Kentucky Judicial Retirement Plan2015 2014 2013 2012

Actuarially determined contribution $ 15,220 $ 15,220 $ 15,220 $ 10,302 Contributions in relation to the actuarially determined contribution 10,805 10,805 10,399 4,946 Contribution deficiency (excess) $ 4,415 $ 4,415 $ 4,821 $ 5,356

Covered-employee payroll 32,930 32,930 32,930 33,175Contributions as a percentage of covered-employee payroll 32.81% 32.81% 31.58% 14.91%

Notes to ScheduleValuation date July 1, 2014 July 1, 2014 July 1, 2013 July 1, 2012

Methods and assumptions used to determine contributions :

Actuarial Cost Method Entry Age Normal Entry Age Normal Entry Age Normal Projected Unit Credit cost

Amortization Method Interest + Interest + Interest + Interest +1% Unfunded 1% Unfunded 1% Unfunded 1% Unfunded Past Liability Past Liability Past Liability Past Liability

Asset Valuation Method Market Value Market Value Market Value Market Value

Investment Return 6.15% 6.15% 7.00% 7.00%

Inflation 3.00% 3.00%

Projected Salary Increase 1% for next 1% for next 1% for next year 1% for next year 5 years 5 years 1% the following year 1% the following year

3.5% thereafter 3.5% thereafter 3.5% thereafter 3.5% thereafter

Mortality

Note: Effective for the year ended June 30, 2008, medical insurance employer contributions have been segregated from defined benefit contributions.

Mortality rates were based on IRS2008 Mortality Tables without collar adjustment with Pre and Post Commencement Rates with projected mortality improvements after 2000 under Projection Scale AA (male and female scales). Prior to July 1, 2011, RP-2000 Mortality Tables projected 2009 without collar adjustment for male and female lives was used.

163

2011 2010 2009 2008 2007 2006

$ 10,302 $ 4,512 $ 4,512 $ 2,375 $ 2,835 $ 1,912

4,534 4,470 4,470 2,375 2,788 1,855 $ 5,768 $ 42 $ 42 $ $ 47 $ 57

33,175 29,887 29,887 31,224 31,941 26,977

13.67% 14.96% 14.96% 7.61% 8.73% 6.88%

July 1, 2011 June 30,2009 June 30,2009 June 30,2008 June 30,2007 June 30,2006

Projected Unit Projected Unit Projected Unit Projected Unit Projected Unit Projected Unit Credit cost Credit cost Credit cost Credit cost Credit cost Credit cost

Interest + Interest + Interest + Interest + Interest + Interest +1% Unfunded 1% Unfunded 1% Unfunded 1% Unfunded 1% Unfunded 1% Unfunded Past Liability Past Liability Past Liability Past Liability Past Liability Past Liability

Market Value Market Value Market Value Market Value Market Value Market Value

7.00% 7.00% 7.00% 7.50% 7.50% 7.50%

1% for next year 1% for next year 1% for next year 4% 4% 4%2% the following year 2% the following year 2% the following year

4% thereafter 4% thereafter 4% thereafter

164

COMMONWEALTH OF KENTUCKY REQUIRED SUPPLEMENTARY INFORMATIONSCHEDULE OF CONTRIBUTIONS - PENSIONFOR THE LAST TEN FISCAL YEARS(Expressed in Thousands)

Kentucky Legislators' Retirement Plan2015 2014 2013 2012


Covered-employee payroll 4,988 4,988 4,988 5,193Contributions as a percentage of covered-employee payroll 36.59% 36.59% 34.00% 19.78%

Notes to ScheduleValuation date July 1, 2014 July 1, 2014 July 1, 2013 July 1, 2012


Actuarial Cost Method Entry Age Normal Entry Age Normal Entry Age Normal Projected Unit Credit cost

Amortization Method Interest + Interest + Interest + Interest +1% Unfunded 1% Unfunded 1% Unfunded 1% Unfunded Past Liability Past Liability Past Liability Open Past Liability Open

Asset Valuation Method Market Value Market Value Market Value Market Value


Inflation 0.03 0.03

Projected Salary Increase 1% for next 1% for next 1% for next year 1% for next year 5 years 5 years 1% the following

year 1% the following

year 3.5% thereafter 3.5% thereafter 3.5% thereafter 3.5% thereafter

Mortality Mortality rates were based on IRS 2008 Mortality Tables without collar adjustment with Pre and Post Commencement Rates with projected mortality improvements after year 2000 under Projection Scale AA (male and female scales).

Prior to July 1 2011, RP-2000 Mortality Tables projected 2009 without collar adjustment for male and female lives was used.

Note: Effective for the year ended June 30,2008, medical insurance employer contributions have been segregated from defined benefit contributions

165

2011 2010 2009 2008 2007 2006

$ 2,140 $ 320 $ 320 $ 429 $ 714 $(34)

942 320 320 429 748 $ 1,198 $ $ $

5,193 4,917 4,917 4,755 4,764 4,426

18.14% 6.51% 6.51% 9.02% 15.70% 0.00%

July 1, 2011 June 30, 2009 June 30, 2009 June 30, 2008 June 30, 2007 June 30, 2006

Projected Unit Projected Unit Projected Unit Projected Unit Projected Unit Projected Unit Credit cost Credit cost Credit cost Credit cost Credit cost Credit cost

Interest + Interest + Interest + Interest + Interest + Interest +1% Unfunded 1% Unfunded 1% Unfunded 1% Unfunded 1% Unfunded 1% Unfunded

Past Liability Open Past Liability Open Past Liability Past Liability Past Liability Past Liability

Market Value Market Value Market Value Market Value Market Value Market Value

7.00% 7.00% 7.50% 7.50% 7.50% 7.50%

1% for next year 1% for next year 1% for next year 4.00% 4.00% 4.00%2% the following



year 4% thereafter 4% thereafter 4% thereafter

166

COMMONWEALTH OF KENTUCKY REQUIRED SUPPLEMENTARY INFORMATIONSCHEDULE OF CONTRIBUTIONS - PENSIONFOR THE LAST TEN FISCALS YEARS(Expressed in Thousands)

State Police Retirement System2015 2014 2013 2012


Covered-employee payroll $ 44,616 $ 44,616 $ 45,256 $ 48,373 Contributions as a percentage of covered-employee payroll 45.45% 45.45% 40.88% 31.76%

Notes to ScheduleValuation date June 30, 2014 June 30, 2014 June 30, 2013 June 30, 2012


Actuarial Cost Method Entry age normal Entry age normal Entry age normal Entry age normal

Amortization MethodLevel percentage of payroll closed

Level percentage of payroll closed



Asset Valuation Method Five-year smoothed market

Five-year smoothed market




Inflation 3.50% 3.50% 3.50% 3.50%

Projected Salary Increase 4.50% 4.50% 4.5%-21% 4.%-21%

MortalityThe rates of mortality for the period after service retirement are according to the 1983 Group Annuity Mortality Table for all retired members and beneficiaries as June 30, 2006, and the 1994 Group Annuity Mortality Table for all other members. The Group Annuity Mortality Table set forward 5 years is used for the period after disability retirement.

167

2011 2010 2009 2008 2007 2006

$ 18,463 $ 18,765 $ 15,952 $ 13,823 $ 9,024 $ 6,353

12,657 9,489 8,186 7,443 6,142 4,244 $ 5,806 $ 9,276 $ 7,766 $ 6,380 $ 2,882 $ 2,109

$ 48,693 $ 51,507 $ 51,660 $ 20,498 $ 49,248 $ 47,744

25.99% 18.42% 15.85% 13.97% 12.47% 8.89%

June 30, 2011 June 30, 2010 June 30, 2009 June 30, 2008 June 30, 2007 June 30, 2006

Entry age normal Entry age normal Entry age normal Entry age normal Entry age normal Entry age normal













7.75% 7.75% 7.75% 7.75% 7.75% 7.75%

3.50% 3.50% 4.50% 3.50% 3.50% 3.50%

4.5%-21% 5%-21% 4.5%-21% 4%-14.5% 4%-14.5% 4%-14.5%

168

COMMONWEALTH OF KENTUCKY REQUIRED SUPPLEMENTARY INFORMATIONSCHEDULE OF CONTRIBUTIONS - PENSIONFOR THE CURRENT FISCAL YEAR(Expressed in Thousands)

Kentucky Employees Retirement Plan2015

Actuarially determined contribution $ 355,949 Contributions in relation to the actuarially determined contribution 202,891 Contribution deficiency (excess) $ (153,058)

Covered-employee payroll 1,078,236Contributions as a percentage of covered-employee payroll 18.82%

Notes to ScheduleValuation date June 30, 2014


Actuarial Cost Method Entry Age

Amortization Method Level percentage of payroll closed

Asset Valuation Method Five-year smoothed

market

Investment Return 3.50%

Inflation 7.75%

Projected Salary Increase 4.5% per annum

Mortality

This is a 10 year schedule. Years will be added to this schedule in future fiscal years until 10 years of information is available.

Non-Hazardous

1983 Group Annuity Table for all retired members and beneficiaries as of June 30, 2006, and the 1994 Group Annuity Mortality Table for all other members.

169


Kentucky Employees Retirement Plan2015

Actuarially determined contribution $ 13,289 Contributions in relation to the actuarially determined contribution 11,428 Contribution deficiency (excess) $ (1,861)

Covered-employee payroll 126,402Contributions as a percentage of covered-employee payroll 9.04%



Actuarial Cost Method Entry Age Normal



market


Inflation 3.50%

Projected Salary Increase 1% per annum

Mortality 1983 Group Annuity Table for all retired members and beneficiaries as of June 30, 2006, and the 1994 Group Annuity Mortality Table for all other members.


Hazardous

170


Kentucky Teachers Retirement System2015

Actuarially determined contribution $Employer 16,469Nonemployer special funding 806,977

Contributions in relation to the actuarially determined contribution

Employer 11,266 Nonemployer special funding 552,060

Contribution deficiency (excess) $ 260,120

Covered-employee payroll 3,443,138 Contributions as a percentage of covered-employee payroll 23.91%



Actuarial Cost Method Entry Age Normal



market


Inflation 3.50%

Projected Salary Increase 4.0-8.20%

Mortality


Mortality rates were based on IRS2000 Combined Mortality Table projected to 2020 using scale AA (set back one year for females) is used for death after service retirement and beneficiaries. The RP-2000 Disabled Mortality table (set back seven years for males and set forward five years for females) is used for death after disability retirement.

172

COMMONWEALTH OF KENTUCKY REQUIRED SUPPLEMENTARY INFORMATIONSCHEDULE OF PROPORTIONATE SHARE OF THE NET PENSION LIABILITYFOR THE CURRENT FISCAL YEAR

Schedule of Changes in Net Pension Liability and Related Ratios(Expressed in Thousands)

Total Pension Liability Service Costs $ 1,000 $ 5,000 $ 7,142 Interest 4,900 21,900 50,391 Changes in benefit terms Differences between expected and actual experience Changes in assumptions 3,700 29,100 Benefit payments/refunds (3,500) (21,800) (53,239) Net change in total pension liability 6,100 34,200 4,294 Total pension liability at July 1 72,600 332,100 676,825 Total pension liability at June 30 $ 78,700 $ 366,300 $ 681,119

Pension Plan Fiduciary Net Position Contributions - employer $ 1,800 $ 12,400 $ 20,279 Contributions - member 200 2,800 5,076 Contributions - Commonwealth of Kentucky Contributions - other employers Net investment income 7,900 32,900 40,374 Benefit payments/refunds (3,500) (21,800) (53,239) Administrative expenses (100) (200) (214) Other 100 400 Net change in plan fiduciary net position 6,400 26,500 12,276 Pension plan fiduciary net position at July 1 48,200 217,400 248,698 Pension plan fiduciary net positon at June 30 $ 54,600 $ 243,900 $ 260,974

Net pension liability at June 30 $ 24,100 $ 122,400 $ 420,145 Pension plan fiduciary net position as a % of the total pension liability 69.38% 66.58% 38.32%Covered-employee payroll 4,988 32,930 44,616Net Pension liability as a % of covered employee payroll 483.16% 371.70% 941.69%


Kentucky Legislators' Retirement Plan

Kentucky Judicial Retirement Plan


173

COMMONWEALTH OF KENTUCKY REQUIRED SUPPLEMENTARY INFORMATIONSCHEDULE OF COMMONWEALTH'S PROPORTIONATE SHARE OF THE NET PENSION LIABILITYFOR THE CURRENT FISCAL YEAR

Schedule of Commonwealth's Proportionate Share of the Net Pension Liability(Expressed in Thousands)

Fiscal Year Ended 2015Commonwealth's proportionate share of the net pension liability (asset) 68.351% 97.928% 94.980%Commonwealth's proportionate share of the collective net pension liability (asset) $ 6,132,338 $ 250,075 $ 20,508,196 Other employers' proportionate share of the collective net pension liability (asset) 2,839,482 5,291 1,084,009 Total collective net pension liability $ 8,971,820 $ 255,366 $ 21,592,205

Commonwealth's covered-employee payroll $ 1,078,236 $ 126,402 $ 3,443,138 Commonwealth's proportionate share of the net pension liability (asset) as a percentage of its covered-employee payroll 568.74% 197.84% 595.63%Pension plan fiduciary net position as a percentage of the total pension liability 22.32% 68.74% 45.59%



Hazardous


Non-Hazardous

175

OTHER SUPPLEMENTARY INFORMATION

176

COMBINING AND INDIVIDUAL FUND STATEMENTS AND SCHEDULES - NON-MAJOR FUNDS

177

NON-MAJOR GOVERNMENTAL FUNDS

Debt Service Funds Turnpike Authority of Kentucky - accounts for and reports financial resources that are restricted, committed, or assigned for the payment of principal, interest, and administrative fees due on debt issued to acquire infrastructure, which is then leased to the Transportation Cabinet of the Commonwealth.

The Kentucky School Facilities Construction Commission - accounts for and reports financial resources which are restricted, committed, or assigned for the payment of the Commonwealth’s portion of principal, interest, and administrative fees due on debt issued by local school districts for school construction.

Special Revenue Funds

The Other Special Revenue Fund - accounts for and reports specific taxes, fees, and charges that are restricted or committed to expenditures for a particular function or activity, but not usually ap-propriated by the General Assembly.

The Turnpike Authority of Kentucky – accounts for and reports specific resources that are restricted, committed, or assigned. The Authority was created to issue debt, which is used to acquire infrastruc-ture, which is then leased to the Transportation Cabinet of the Commonwealth.

The Kentucky School Facilities Construction Commission - accounts for and reports specific re-sources which are restricted, committed, or assigned. This fund was established to assist local school districts in meeting the school construction needs of the Commonwealth in a manner that ensures an equitable distribution of funds based upon unmet needs.

The Special Benefits Fund - accounts for other fiduciary monies that will be expended for desig-nated operations.

178

COMMONWEALTH OF KENTUCKYCOMBINING BALANCE SHEETNON-MAJOR GOVERNMENTAL FUNDS JUNE 30, 2015(Expressed in Thousands)

AssetsCash and cash equivalents $ 3,572 $ $Investments, net of amortization 95,318Invested security collateral 12,227Receivables, net 134,010Notes receivable 2,097Interfund receivables 116,205 1,766Interfund loan receivable 13,566Inventories 37

Total Assets $ 119,777 $ $ 259,021

Liabilities and Fund BalancesLiabilities:

Accounts payable $ $ $ 775Interfund payables 21,930Interfund loan payable 52,744Obligations under securities lending 12,227Unearned revenue 1,671 34

Total Liabilities 1,671 87,710

Deferred inflows of resourcesUnavailable 51,105

Fund Balances:Nonspendable

Inventories 37Long-term receivables 2,097

Restricted for:General government 3,419Legislative and judicialCommerce 2,096Education and humanities 15,985Human resources 49,505Natural resources and

environmental protection 15,107Public protection and regulationTransportation 1,629Debt service 118,106

Committed to:General government 26,654Education and humanities 114Human resources 520JusticeNatural resources and

environmental protectionAssigned to:

General government 3,043Total Fund Balances 118,106 120,206

Total Liabilities and FundBalances $ 119,777 $ $ 259,021

of Kentucky Commission

OtherSpecial

Revenue

KentuckySchool Facilities

ConstructionTurnpikeAuthority

Special Revenue FundsDebt Service Funds

179

$ 119,549 $ 11,438 $ 131,305 $ 265,86474,971 10,582 90,430 271,301

63,662 75,88956,739 190,749

2,0972,324 4,619 124,914

13,56637

$ 194,520 $ 24,344 $ 346,755 $ 944,417

$ 10 $ 26 $ 14,182 $ 14,993116,205 3,673 3,985 145,793

52,74463,662 75,889

1,705116,215 3,699 81,829 291,124

49,974 101,079

372,097

34,284 37,7031 1

2,09620,645 2,332 38,962

27,026 76,531

49,830 64,937856 856

78,305 79,934118,106

54,818 81,4729,375 9,4895,064 5,584

473 473

30,893 30,893

3,04378,305 20,645 214,952 552,214

$ 194,520 $ 24,344 $ 346,755 $ 944,417

BenefitsSpecial

of Kentucky

KentuckySchool Facilities

Special Revenue FundsTotal

Non-MajorGovernmental

FundsConstructionCommission

TurnpikeAuthority

180

COMMONWEALTH OF KENTUCKYCOMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCESNON-MAJOR GOVERNMENTAL FUNDSFOR THE YEAR ENDED JUNE 30, 2015(Expressed in Thousands)

KentuckyTurnpike School Facilitites OtherAuthority Construction Special

of Kentucky Commission RevenueRevenuesTaxes $ $ $ 69,832Licenses, fees, and permits 460IntergovernmentalCharges for services 77,709Fines and forfeits 18,689Interest and other investment income 470Increase (decrease) in fair value

of investments (199)Securities lending income 58Other revenues 3,344 13,025

Total Revenues 3,344 180,044


General government 94,627 116,014Commerce 435Education and humanities 47,201Human resources 4,967JusticeNatural resources and

environmental protection 74Public protection and regulationTransportation

Debt service:Principal retirement 73,570 70,402Interest and fiscal charges 72,242 26,560Other expenditures 16,399

Securities lending expense 26Total Expenditures 145,812 207,988 168,717

Excess (Deficiency) of Revenues over (under) Expenditures (142,468) (207,988) 11,327

Other Financing Sources (Uses)Transfers in 149,596 96,962 309,930Transfers out (327,905)Issuance of bonds:

New issues 93,302Refunding issues 119,332Premiums 4,351Discounts (972)

Payments to refunded bond escrow agent (104,987)Total Other Financing Sources (Uses) 149,596 207,988 (17,975)

Net Change in Fund Balances 7,128 (6,648)Fund Balances at July 1 110,978 126,854Fund Balances at June 30 $ 118,106 $ $ 120,206

Debt Service Funds Special Revenue Funds

181

Kentucky TotalTurnpike School Facilities Non-MajorAuthority Construction Special Governmental

of Kentucky Commission Benefits Funds

$ $ $ 21,349 $ 91,1814,104 4,564

118 118165,576 243,285

2,146 20,835875 16 3,241 4,602

(1,698) (1,897)304 362

16 6,497 80,610 103,492891 6,513 275,750 466,542

67,403 278,04436 471

12,717 14,004 73,92222,405 27,372

1,679 1,679

7,881 7,9552,588 2,588

102,762 102,252 205,014

143,97298,80216,399

136 162102,762 12,717 218,384 856,380

(101,871) (6,204) 57,366 (389,838)

149,596 19,071 20,569 745,724(149,596) (12,236) (79,209) (568,946)

93,302119,332

4,351(972)

(104,987)6,835 (58,640) 287,804

(101,871) 631 (1,274) (102,034)180,176 20,014 216,226 654,248

$ 78,305 $ 20,645 $ 214,952 $ 552,214

Special Revenue Funds

182

SCHEDULE OF FUND ACTIVITIES

183

COMMONWEALTH OF KENTUCKYSCHEDULE OF REVENUES BY SOURCEGENERAL FUNDFOR THE YEAR ENDED JUNE 30, 2015(Expressed In Thousands)

Revenues by SourceTaxes:

Sales and gross receipts $ 4,109,920Income:

Individual 4,048,848Corporations 536,961

Property 675,961Coal severance 200,801Licenses and privileges 827Inheritance and estate 50,261Miscellaneous 2,641

Total Taxes 9,626,220

Licenses, fees, and permits 47,898Intergovernmental 10,321Charges for services 248,409Fines and forfeits 36,463Interest and other investment income 4,326Increase (decrease) in fair value of investments (581)Securities lending income 530Other revenues 36,958

Total Revenues by Source $ 10,010,544

June 30, 2015

184

COMMONWEALTH OF KENTUCKYSCHEDULE OF EXPENDITURES BY FUNCTION, CABINET, AND OBJECTGENERAL FUNDFOR THE YEAR ENDED JUNE 30, 2015(Expressed In Thousands)

General Government:Personal services $ 284,118 Utilities, rentals, and other services 43,237 Commodities and supplies 27,298 Grants and subsidies 1,160,146 Capital outlay 707 Travel 1,423 Judgments and contingent liabilities 12,344 Other 2,491

Total General Government 1,531,764

Legislative and Judicial:Personal services 220,221 Utilities, rentals, and other services 123,681 Commodities and supplies 19,882 Grants and subsidies 20,465 Capital outlay 2,385 Claims 24 Travel 4,140 Judgments and contingent liabilities 32 Principal retirement 2,033 Other 112

Total Legislative and Judicial 392,975

Commerce:Personal services 11,580Utilities, rentals, and other services 1,864Commodities and supplies 756Grants and subsidies 16,242Capital Outlay 120Travel 235

Total Commerce 30,797

Education and Humanities:Personal services 99,674Utilities, rentals, and other services 24,379Commodities and supplies 6,094Grants and subsidies 4,114,761Capital outlay 224Claims (147)Travel 2,049Judgments and contingent liabilities (291)

Total Education and Humanities 4,246,743

Human Resources:Personal services 219,733Utilities, rentals, and other services 36,876Commodities and supplies 4,406Grants and subsidies 1,925,696Capital Outlay 3,569Claims 62,647Travel 5,770Judgments and contingent liabilities 42

Total Human Resources 2,258,739

Justice:Personal services 393,413Utilities, rentals, and other services 52,281Commodities and supplies 21,759Grants and subsidies 224,532Capital outlay 4,291Claims 39Travel 3,661Judgments and contingent liabilities 3,600

Total Justice 703,576

June 30, 2015

185

COMMONWEALTH OF KENTUCKYSCHEDULE OF EXPENDITURES BY FUNCTION, CABINET, AND OBJECTGENERAL FUNDFOR THE YEAR ENDED JUNE 30, 2015(Expressed In Thousands)

Natural Resources and Environmental Protection:Personal services $ 56,344Utilities, rentals, and other services 5,973Commodities and supplies 2,295Grants and subsidies 1,409Capital outlay 9Travel 218

Total Natural Resources and Environmental Protection 66,248

Public Protection and Regulation:Personal services 13,371Utilities, rentals, and other services 1,483Commodities and supplies 193Grants and subsidies 252Capital outlay 131Travel 101

Total Public Protection and Regulation 15,531

Transportation:Personal services 415Utilities, rentals, and other services 4Commodities and supplies 40Grants and subsidies 13,533Travel 3

Total Transportation 13,995Securities lending 237

Total Expenditures $ 9,260,605

June 30, 2015

186

COMMONWEALTH OF KENTUCKYSCHEDULE OF REVENUES AND EXPENDITURES BY TYPETRANSPORTATION FUNDFOR THE YEAR ENDED JUNE 30, 2015(Expressed In Thousands)

Revenues:Taxes $ 1,361,857Licenses, fees and permits 145,649Intergovernmental 7Charges for services 8,649Fines and forfeits 25Interest and other investment income 5,506Increase (decrease) in fair value

of investments (3,317)Securities lending income 627Other revenues 6,739

Total Revenues 1,525,742

Expenditures:Transportation:

General administration and support 68,190Motor vehicle regulation 22,286Justice - state police 95,892Highways 1,377,632Aviation 761Securities lending 280Other 400

Total Expenditures $ 1,565,441

June 30, 2015

187

INTERNAL SERVICE FUNDS

Internal Service Funds account for the financing of goods and services provided on a cost reimbursement basis by one agency of the Commonwealth to other state agencies. Kentucky uses the following Internal Service Funds:

Fleet Management Fund - accounts for expenses incurred and reimbursements received for the management and maintenance of the Commonwealth’s motor vehicle fleet.

Computer Services Fund - accounts for expenses incurred and reimbursements received for computer and related data processing services.

Prison Industries Fund - accounts for expenses incurred and reimbursements received for industrial operations within the correctional system.

Central Printing Fund - accounts for expenses incurred and reimbursements received by the Divi-sion of Printing.

Property Management Fund - accounts for expenses incurred and reimbursements received for space rental and maintenance operations.

Risk Management Fund - accounts for the self-insurance operations administered by the State which include the following programs:

Fire and Tornado Insurance Program - accounts for monies received by the Department of Insurance from State agencies and expended for insuring State property against loss from fires, tornadoes, etc.

State Workers’ Compensation Program - accounts for monies received by the Personnel Cabinet from State agencies and expended for claims of job related injuries to State employees.

Transportation Cabinet’s Self-Insured Workers’ Compensation Trust Program - provides workers’ compensation insurance for the employees of the Transportation Cabinet.

188

COMMONWEALTH OF KENTUCKYCOMBINING STATEMENT OF FUND NET POSITIONINTERNAL SERVICE FUNDSJUNE 30, 2015(Expressed in Thousands)


Cash and cash equivalents $ 6,876 $ 15,544 $ 1,466Cash with fiscal agents 7,681Receivables, net 3 111 467Interfund receivables 4,278 187Inventories 17 467 1,954Prepaid expenses


Noncurrent assets:Investments, net 4,995Receivables, netLand 657Improvements other than buildingsBuildings 9,522 5,816Machinery and equipment 76,271 47,433 5,803Easements and other intangibles 1,675

Less: Accumulated depreciation (56,565) (45,138) (6,103)Construction in progress

Total Capital Assets 19,706 13,492 6,173 Total Noncurrent Assets, Net 19,706 18,487 6,173

Total Assets 34,283 38,887 10,247Deferred outflows of resources 282 8,531 783


Accounts payable 1,150 6,232 636Interfund payables 8 1,903 34Interfund loans payableClaims liabilityClaims adjustment liabilityCapital lease obligations 7,703 1,899Compensated absences 67 2,902 197Unearned revenue 26

Total Current Liabilities 8,928 12,962 867

Noncurrent liabilities:Claims liabilityClaims adjustment liabilityCapital lease obligations 10,531 3,802Compensated absences 62 2,445 296Net pension liability 4,857 146,916 13,490

Total Noncurrent Liabilities 15,450 153,163 13,786Total Liabilities 24,378 166,125 14,653

Deferred inflows of resources 62 1,888 173

Net PositionNet investment in capital assets 1,472 7,790 6,173Unrestricted 8,653 (128,385) (9,969)Total Net Position $ 10,125 $ (120,595) $ (3,796)

PrisonIndustries

FleetManagement

ComputerServices

189

$ $ 15,621 $ 16,432 $ 55,93944,435 52,116

5 180 351 1,11710 4,475

43 2,4815 5

48 60,246 16,788 116,133

12,356 335 17,686238 238

17,147 17,8043,133 3,133

260,250 275,588943 2,104 132,554

1,675(837) (171,523) (280,166)

96,886 96,886106 207,997 247,474106 220,353 573 265,398154 280,599 17,361 381,531189 2,484 334 12,603

121 2,737 3,842 14,7185 113 8 2,071

459 2,085 2,54426,326 26,326

800 80043 749 10,39481 13 54 3,314

26709 5,697 31,030 60,193

183,747 183,7474,588 4,588

11 7,848 22,19261 1,712 93 4,669

3,260 42,779 5,604 216,9063,332 52,339 194,032 432,1024,041 58,036 225,062 492,295

42 550 72 2,787

52 199,400 214,887(3,792) 25,097 (207,439) (315,835)

$ (3,740) $ 224,497 $ (207,439) $ (100,948)

CentralPrinting

TotalsJune 30, 2015

PropertyManagement

Risk Management

190

COMMONWEALTH OF KENTUCKYCOMBINING STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET POSITIONINTERNAL SERVICE FUNDSFOR THE YEAR ENDED JUNE 30, 2015(Expressed in Thousands)

Operating Revenues:Charges for services $ 26,715 $ 114,912 $ 11,110Other revenues 233 13

Total Operating Revenues 26,948 114,912 11,123

Operating Expenses:Personal services 1,889 77,906 3,690Utilities, rentals, and other services 2,902 20,840 1,246Commodities and supplies 12,919 13,913 5,320Grants and subsidies 569Depreciation and amortization 6,771 14,082 429Travel 114 29Reinsurance expenseClaims expenseClaims adjustment expense

Total Operating Expenses 24,481 126,855 11,283Operating Income (Loss) 2,467 (11,943) (160)

Nonoperating Revenues (Expenses):Gain (loss) on sale of capital assets 645 (653) 18Interest and other investment incomeInterest expense (209) (256)Other revenues (expenses)

Total Nonoperating Revenues and Expenses 436 (909) 18

Income (Loss) before Transfers 2,903 (12,852) (142)

Capital contributions 71Transfers inTransfers out (500)

Change in Net Position 2,974 (13,352) (142)

Net Position at July 1, As Restated 7,151 (107,243) (3,654)Net Position at June 30 $ 10,125 $ (120,595) $ (3,796)

IndustriesPrisonFleet Computer

Management Services

191

Totals

$ 1,638 $ 35,886 $ 32,528 $ 222,78935 13,646 13,927

1,638 35,921 46,174 236,716

1,140 18,744 3,213 106,582360 13,359 2,432 41,139239 10,012 141 42,544

56957 5,323 26,662

29 3 17512,987 12,98737,947 37,947

404 4041,796 47,467 57,127 269,009(158) (11,546) (10,953) (32,293)

(132) (122)(1) (1)

(1) (332) (798)70 70

(1) (464) 69 (851)

(159) (12,010) (10,884) (33,144)

7163,876 63,876

(289) (2,070) (2,859)

(159) 51,577 (12,954) 27,9440

(3,581) 172,920 (194,485) (128,892)$ (3,740) $ 224,497 $ (207,439) $ (100,948)

June 30, 2015PrintingCentral Property Risk

Management Management

192

COMMONWEALTH OF KENTUCKYCOMBINING STATEMENT OF CASH FLOWSINTERNAL SERVICE FUNDSFOR THE YEAR ENDED JUNE 30, 2015(Expressed in Thousands)

Cash Flows from Operating ActivitiesCash received from customers - public $ $ 6,153 $ 4,263Cash received from customers - state 26,770 116,140 6,832Cash payments to suppliers for goods and services (17,534) (32,537) (6,566)Cash payments for employee salaries and benefits (1,804) (74,860) (3,422)Cash payments for claims expenseCash payments from other sources 368 13Cash payments to other sources (568)

Net Cash Provided (Used) by Operating Activities 7,800 14,896 552

Cash Flows from Noncapital Financing ActivitiesTransfers from other fundsTransfers to other funds (500)

Net Cash Provided (Used) by Noncapital Financing Activities (500)

Cash Flows from Capital and Related Financing ActivitiesAcquisition and construction of capital assets (11,865) (511)Principal paid on revenue bond maturities and equipment contracts (6,146) (1,569)Interest paid on revenue bonds and equipment contracts (209) (256)Proceeds from the sale of capital assets 645 17

Net Cash Provided (Used) for Capital and Related Financing Activities (5,710) (13,690) (494)

Cash Flows from Investing ActivitiesProceeds from the sale of investment securities 1,444

Net Cash Provided (Used) in Investing Activities 1,444

Net Increase (Decrease) in Cash and Cash Equivalents 2,090 2,150 58Cash and Cash Equivalents at July 1 4,786 13,394 1,408Cash and Cash Equivalents at June 30 $ 6,876 $ 15,544 $ 1,466

Reconciliation of Operating Income to Net Cash Provided by Operating Activities:Operating income (loss) $ 2,467 $ (11,943) $ (160)Adjustments to reconcile operating income to

net cash provided by operating activities:Depreciation and amortization 6,771 14,082 429Miscellaneous nonoperating income (expense) 135Change in assets and liabilities:

(Increase) Decrease in assets:Receivables, net 1 5,499 (53)Interfund receivables 53 1,977 39Inventories (6) (9) (199)Prepaid expenses 1 400

(Increase) decrease in deferred outflows (121) (3,670) (336)Increase (decrease) in liabilities:

Accounts payable (357) 940 185Interfund payables (1,350) 886 14Claims liabilityClaims adjustment liabilityCompensated absences 586 60Unearned revenue (94)Pension liability 144 4,354 400

Increase (decrease) in deferred inflows 62 1,888 173Net Cash Provided by Operating Activities $ 7,800 $ 14,896 $ 552

Noncash Investing, Capital, and Financing ActivitiesContributions of capital assets $ 71 $ $Capital assets acquired through leases 1,577 5,412

Total Noncash Investing, Capital, and Financing Activities $ 1,648 $ 5,412 $

PrisonIndustries

FleetManagement

ComputerServices

193

$ $ 191 $ 18,890 $ 29,4971,633 35,637 27,640 214,652(542) (25,511) (82,690)

(1,048) (18,036) (3,242) (102,412)(43,668) (43,668)

35 416(1,644) (2,212)

43 (7,684) (2,024) 13,583

63,876 63,876(289) (2,070) (2,859)

63,587 (2,070) 61,017

(18,196) (30,572)(42) (722) (8,479)

(1) (332) (798)662

(43) (19,250) (39,187)

4,690 441 6,5754,690 441 6,575

41,343 (3,653) 41,98818,713 20,085 58,386

$ $ 60,056 $ 16,432 $ 100,374

$ (158) $ (11,546) $ (10,953) $ (32,293)

57 5,323 26,662(530) (395)

(5) (141) (250) 5,05183 274 2,426

(8) (222)2 (4) 399

(81) (1,069) (149) (5,426)

27 765 2,866 4,42638 (2,906) 144 (3,174)

7,120 7,120(785) (785)

35 (13) 5 673(94)

96 1,268 166 6,42842 550 72 2,787

$ 43 $ (7,684) $ (2,024) $ 13,583

$ $ $ $ 716,989

$ $ $ $ 7,060

TotalsJune 30, 2015

PropertyManagement

RiskManagement

CentralPrinting

194

CAPITAL ASSETS

195

COMMONWEALTH OF KENTUCKYCAPITAL ASSETS USED IN THE OPERATION OF GOVERNMENTAL FUNDS BY SOURCEJUNE 30, 2015(Expressed In Thousands)

Governmental Funds Capital AssetsLand $ 201,697Improvements other than buildings 22,812Buildings 1,124,099Machinery and equipment 510,766Software/other intangibles 41,832Easements 136,106Construction in progress 1,814,985Infrastructure 20,230,790

Total Governmental Funds Capital Assets $ 24,083,087

Investments in Governmental Funds Capital Assets by SourceGeneral Fund $ 115,881Special Revenue Funds 682,029 Donations 147,387Other 1,601,849Capital Projects Fund: State appropriations 51,056 Revenue bonds 532,641 Federal grants 326,837 Other 205,107Infrastructure (A) 20,230,790Capital assets acquired prior to July 1, 1984 (A) 144,721Capital assets acquired after July 1, 1984 (A) 44,789

Total Governmental Funds Capital Assets by Source $ 24,083,087

(1) Internal Service Funds are not included in this schedule. Internal Service Fund assets are included as governmental activities in the Statement of Net Position.(A) Capital assets with an undetermined funding source.

June 30, 2015

196

COMMONWEALTH OF KENTUCKYCAPITAL ASSETS USED IN THE OPERATION OF GOVERNMENTAL FUNDSSCHEDULE BY FUNCTIONJUNE 30, 2015(Expressed in Thousands)

General Government $ 33,383 $ 12,402 $ 279,837

Legislative & Judicial 2,032 10,453

Commerce 103,061 3,115 18,194

Education & Humanities 1,266 664 45,088

Human Resources 1,766 1,257 69,448

Justice 4,541 5,273 494,752

Natural Resources and Environmental Protection 37,865 101 1,355

Public Protection and Regulation

Transportation 17,783 204,972

Total Governmental Funds Capital Assets by Function $ 201,697 $ 22,812 $ 1,124,099

(1) Internal Service Funds are not included in this schedule. Internal Service Fund assets are included as governmental activities in the Statement of Net Position.

BuildingsLand

ImprovementsOther ThanBuildings

197

$ 27,743 $ 36,605 $ 58,390 $ 90,811 $ $ 539,171

11,300 2,347 26,132

28,667 5,525 158,562

30,075 12,474 471 90,038

18,609 229,654 320,734

86,771 5,227 29,170 625,734

37,773 15,935 86 93,115

4,858 4,858

264,970 49,307 1,456,921 20,230,790 22,224,743

$ 510,766 $ 41,832 $ 136,106 $ 1,814,985 $ 20,230,790 $ 24,083,087

OtherIntangibles Easements

Software /Totals

June 30, 2015 Progressin

Construction

Infrastructure

Machinery and

Equipment

198

COMMONWEALTH OF KENTUCKYCAPITAL ASSETS USED IN THE OPERATION OF GOVERNMENTAL FUNDSSCHEDULE OF CHANGES BY FUNCTIONFOR THE YEAR ENDED JUNE 30, 2015(Expressed in Thousands)

General Government $ 512,082 $ 38,542 $ 11,453 $ 539,171

Legislative & Judicial 17,767 10,920 2,555 26,132

Commerce 155,368 5,291 2,097 158,562

Education & Humanities 96,822 3,242 10,026 90,038

Human Resources 332,826 13,917 26,009 320,734

Justice 620,985 13,217 8,468 625,734

Natural Resources and Environmental Protection 90,471 4,305 1,661 93,115

Public Protection and Regulation 4,872 828 842 4,858

Transportation 21,764,771 1,055,398 595,426 22,224,743

Total Governmental Funds Capital Assets by Function $ 23,595,964 $ 1,145,660 $ 658,537 $ 24,083,087

(1) Internal Service Funds are not included in this schedule. Internal Service Fund assets are included as governmental activities in the Statement of Net Position.

Balance as RestatedJune 30, 2014

BalanceJune 30, 2015Additions Deductions

199

PENSION (AND OTHER POST EMPLOYMENT BENEFIT) TRUST FUNDS

Pension (and other post employment benefit) trust funds account for monies received for and expenses incurred by the various public employee retirement systems administered by the Com-monwealth. Kentucky uses the following pension trust funds:

Kentucky Employees Retirement System (KERS) - accounts for pension and other post employment benefits administered by the System, which covers substantially all regular full-time employees of any State department, board or agency directed by Executive Order to participate in the System.

County Employees Retirement System (CERS) - accounts for pension and other post employment benefits administered by the System, which covers substantially all regular full-time employees of each county, local school board, and additional local agencies elect-ing to participate in the System.

State Police Retirement System (SPRS) - accounts for pension and other post employ-ment benefits administered by the System, which covers substantially all regular full-time officers of the Kentucky State Police.

Kentucky Teachers’ Retirement System (KTRS) - accounts for pension and other post employment benefits administered by the System, which covers substantially all persons occupying positions in the public elementary and secondary schools for which a certificate is required, faculty members of five regional universities, the Commissioner of Education and the professional staff members of the Department of Education.

Judicial Retirement Plan - accounts for pension and other post employment benefits ad-ministered by the Plan, which covers all District Judges, Judges of the Court of Appeals, and Judges of the Supreme Court.

Legislators’ Retirement Plan - accounts for pension and other post employment benefits administered by the Plan, which covers all members of the General Assembly.

Kentucky Public Employees Deferred Compensation Authority - accounts for the monies withheld from participating employees' payroll to be placed in an Internal Revenue Code Section 401 or 457 deferred compensation plan. The amounts are deposited with third party administrators which oversee the investment activities of such monies.

200

COMMONWEALTH OF KENTUCKYCOMBINED STATEMENT OF FIDUCIARY NET POSITIONPENSION AND OTHER POST EMPLOYMENT BENEFIT TRUST FUNDSJUNE 30, 2015(Expressed in Thousands)

AssetsCash and Short-Term Investments:

Cash $ 159,274 $ 29,219 $ 188,493Short-term investments 1,018,200 137,139 1,155,339

Total Cash and Short-Term Investments 1,177,474 166,358 1,343,832

Receivables:Investments - accounts receivable 480,785 113,984 594,769Interest receivable 41,714 2,629 44,343Accounts receivable 274,729 62,066 336,795

Total Receivables 797,228 178,679 975,907

Investments at Fair Value:Corporate and government bonds 6,165,901 1,970,600 8,136,501Common stocks 19,768,652 2,490,017 22,258,669Mortgages 227,767 6,649 234,416Alternatives 844,688 11,698 856,386Derivatives 1,282,166 2,279 1,284,445Real estate 1,444,512 238,205 1,682,717 Other 1,397,334 134,631 1,531,965

Total Investments at Fair Value 31,131,020 4,854,079 35,985,099

Invested security collateral 1,242,121 234,509 1,476,630Capital assets, net 24,830 24,830Prepaid expenses 110 20 130

Total Assets 34,372,783 5,433,645 39,806,428

LiabilitiesInvestments - accounts payable 474,659 118,252 592,911Accounts payable 13,977 6,539 20,516Obligations under securities lending 1,242,121 234,509 1,476,630Unearned revenue 4,914 4,914

Total Liabilities 1,730,757 364,214 2,094,971

Net Position Restricted for Pensions andOther Post Employment Benefits $ 32,642,026 $ 5,069,431 $ 37,711,457

TotalsFunds Funds June 30, 2015

Pension Insurance

201

COMMONWEALTH OF KENTUCKYCOMBINED STATEMENT OF CHANGES IN FIDUCIARY NET POSITIONPENSION AND OTHER POST EMPLOYMENT BENEFIT TRUST FUNDSFOR THE YEAR ENDED JUNE 30, 2015(Expressed in Thousands)


Employer $ 1,103,292 $ 431,542 $ 1,534,834Member 733,087 158,520 891,607Non-Employer 480,073 68,463 548,536

Total Contributions 2,316,452 658,525 2,974,977

Other Contributions:Recovery Income 22,998 22,998Participant fees 7,437 7,437Other receipts 23,531 23,531

Total Other Contributions 30,968 22,998 53,966

Investment Income:Net increase (decrease) in fair value of investments 564,676 11,390 576,066Interest 554,330 111,006 665,336Dividends 209,787 1,610 211,397Real estate operating income, net 28,785 28,785Securities lending income, net 5,717 1,329 7,046

Total Investment Income 1,363,295 125,335 1,488,630

Less: Investment expense 131,073 29,376 160,449Less: Securities lending expense 1,083 155 1,238

Net Investment Income 1,231,139 95,804 1,326,943Total Additions 3,578,559 777,327 4,355,886

DeductionsBenefit payments 3,768,165 4,061 3,772,226Refunds 55,925 4 55,929Administrative expenses 48,180 3,878 52,058Self funding insurance cost 246,496 246,496Healthcare premium subsidies 331,583 331,583Other deductions, net 9 9

Total Deductions 3,872,270 586,031 4,458,301

Change in Net Position (293,711) 191,296 (102,415)

Net Position at July 1 32,935,737 4,878,135 37,813,872Net Position at June 30 $ 32,642,026 $ 5,069,431 $ 37,711,457

TotalsFunds Funds June 30, 2015

Pension Insurance

202

COMMONWEALTH OF KENTUCKYCOMBINING STATEMENT OF FIDUCIARY NET POSITIONPENSION AND OTHER POST EMPLOYMENT BENEFIT TRUST FUNDS - PENSION FUNDSJUNE 30, 2015(Expressed in Thousands)


Cash $ 1,739 $ 162 $ 1,556 $ 583Short-term investments 97,852 21,560 196,485 71,675

Total Cash and Short-Term Investments 99,591 21,722 198,041 72,258

Receivables:Investments - accounts receivable 61,259 14,378 171,855 54,591Interest receivableContributions/Accounts receivable 67,542 5,256 53,477 14,804

Total Receivables 128,801 19,634 225,332 69,395

Investments at Fair Value:Corporate and government bonds 549,814 124,535 1,482,180 478,772Common stocks 1,225,044 310,560 3,639,706 1,174,073MortgagesAlternativesDerivatives 266,392 59,463 705,647 223,749Real estate 113,324 31,745 348,220 112,134Other

Total Investments at Fair Value 2,154,574 526,303 6,175,753 1,988,728

Invested security collateral 145,667 35,156 413,476 133,570Capital assets, net 3,363 292 5,744 475Prepaid expenses

Total Assets 2,531,996 603,107 7,018,346 2,264,426Deferred outflows of resources

LiabilitiesInvestments - accounts payable 55,701 13,354 158,667 51,308Accounts payable 2,846 2,129 5,403 1,346Obligations under securities lending 145,667 35,156 413,476 133,570

Total Liabilities 204,214 50,639 577,546 186,224

Net Position Restricted for Pensions andOther Post Employment Benefits $ 2,327,782 $ 552,468 $ 6,440,800 $ 2,078,202

Non-Hazardous Hazardous

KentuckyEmployees'Retirement

SystemNon-Hazardous Hazardous

CountyEmployees'Retirement

System

203

$ 215 $ 153,470 $ 20 $ 37 $ 1,492 $ 159,2747,796 612,202 10,630 1,018,2008,011 765,672 20 37 12,122 1,177,474

6,219 172,483 480,78540,685 823 206 41,714

9,815 82,282 114 11 41,428 274,72916,034 295,450 937 217 41,428 797,228

51,278 2,717,752 67,057 15,247 679,266 6,165,901137,281 11,163,791 196,530 44,521 1,877,146 19,768,652

227,767 227,767844,688 844,688

26,915 1,282,16613,754 825,335 1,444,512

1,385,897 13 86 11,338 1,397,334229,228 17,165,230 263,600 59,854 2,567,750 31,131,020

15,392 498,860 1,242,12150 14,906 24,830

110 110268,715 18,740,228 264,557 60,108 2,621,300 34,372,783

5,779 189,589 261 474,659315 1,666 272 13,977

15,392 498,860 1,242,12121,486 690,115 533 1,730,757

$ 247,229 $ 18,050,113 $ 264,557 $ 60,108 $ 2,620,767 $ 32,642,026

June 30, 2015Compensation

AuthorityTotals

Employees' DeferredLegislators'Retirement

Plan

State PoliceRetirement

System

JudicialRetirement

PlanSystem

Kentucky PublicKentuckyTeachers'

Retirement

204

COMMONWEALTH OF KENTUCKYCOMBINING STATEMENT OF CHANGES IN FIDUCIARY NET POSITIONPENSION AND OTHER POST EMPLOYMENT BENEFIT TRUST FUNDS - PENSION FUNDS FOR THE YEAR ENDED JUNE 30, 2015(Expressed in Thousands)


Employer $ 525,873 $ 29,073 $ 305,238 $ 109,156Member 100,424 12,670 133,637 46,609Non-Employer

Total Contributions 626,297 41,743 438,875 155,765

Other Contributions:Participant feesOther receipts 8,442 767 10,280 2,865

Total Other Contributions 8,442 767 10,280 2,865

Investment Income:Net increase (decrease) in fair value of investments (4,791) (1,263) (7,218) (256)Interest 65,596 13,898 160,824 51,237DividendsReal estate operating income, netSecurities lending income, net 592 140 1,713 550

Total Investment Income 61,397 12,775 155,319 51,531

Less: Investment expense 16,711 4,063 44,636 14,387Less: Securities lending expense 117 11 114 40

Net Investment Income 44,569 8,701 110,569 37,104Total Additions 679,308 51,211 559,724 195,734

DeductionsBenefit payments 905,790 56,774 615,335 200,134Refunds 13,552 2,609 13,524 3,111Administrative expenses 10,473 845 18,211 1,291

Total Deductions 929,815 60,228 647,070 204,536

Change in Net Position (250,507) (9,017) (87,346) (8,802)

Net Position at July 1 2,578,289 561,485 6,528,146 2,087,004Net Position at June 30 $ 2,327,782 $ 552,468 $ 6,440,800 $ 2,078,202 $

SystemRetirement

SystemNon-Hazardous Hazardous Non-Hazardous Hazardous

CountyEmployees'

KentuckyEmployees'Retirement

205

$ 32,084 $ 79,586 $ 15,405 $ 3,375 $ 3,502 $ 1,103,2925,150 308,160 1,911 228 124,298 733,087

480,073 480,07337,234 867,819 17,316 3,603 127,800 2,316,452

7,437 7,437646 419 112 23,531646 419 112 7,437 30,968

(1,303) 429,106 19,957 4,299 126,145 564,6766,380 242,316 1,652 334 12,093 554,330

204,865 4,002 920 209,78728,785 28,785

61 2,661 5,7175,138 907,733 25,611 5,553 138,238 1,363,295

1,708 44,727 204 4,637 131,0733 798 1,083

3,427 862,208 25,407 5,553 133,601 1,231,13941,307 1,730,027 43,142 9,268 268,838 3,578,559

54,766 1,741,553 22,236 3,681 167,896 3,768,16585 23,033 6 5 55,925

201 8,869 213 118 7,959 48,18055,052 1,773,455 22,455 3,804 175,855 3,872,270

(13,745) (43,428) 20,687 5,464 92,983 (293,711)

260,974 18,093,541 243,870 54,644 2,527,784 32,935,737$ 247,229 $ 18,050,113 $ 264,557 $ 60,108 $ 2,620,767 $ 32,642,026

StatePolice

RetirementSystem

KentuckyTeachers'

RetirementSystem

TotalsJune 30, 2015

JudicialRetirement

Plan

Legislators'Retirement

Plan

Employees' DeferredCompensation

Authority

Kentucky Public

206

COMMONWEALTH OF KENTUCKYCOMBINING STATEMENT OF FIDUCIARY NET POSITIONPENSION AND OTHER POST EMPLOYMENT BENEFIT TRUST FUNDS - INSURANCE FUNDS JUNE 30, 2015(Expressed in Thousands)


Cash $ 286 $ 30 $ 541 $ 25Short-term investments 20,560 9,936 39,657 24,256

Total Cash and Short-Term Investments 20,846 9,966 40,198 24,281

Receivables:Investments - accounts receivable 17,621 11,808 51,257 28,223Interest receivableContributions/Accounts receivable 12,342 1,367 14,399 5,784

Total Receivables 29,963 13,175 65,656 34,007

Investments at Fair Value:Corporate and government bonds 280,399 188,983 824,725 457,526Common stocks 317,389 213,551 935,274 510,439MortgagesAlternativesDerivatives 352 239 1,033 566Real estate 36,346 25,554 106,604 58,404 Other

Total Investments at Fair Value 634,486 428,327 1,867,636 1,026,935

Invested security collateral 36,359 24,376 106,186 58,472Prepaid expenses

Total Assets 721,654 475,844 2,079,676 1,143,695Deferred outflows of resources

LiabilitiesInvestments - accounts payable 18,756 12,254 51,743 28,401Accounts payable 900 101 801 342Obligations under securities lending 36,359 24,376 106,186 58,472Unearned revenue

Total Liabilities 56,015 36,731 158,730 87,215

Net Position Restricted for Pensions andOther Post Employment Benefits $ 665,639 $ 439,113 $ 1,920,946 $ 1,056,480

Kentucky CountyEmployees' Employees'

System SystemNon-Hazardous Hazardous Non-Hazardous Hazardous

Retirement Retirement

207

$ 12 $ 28,297 $ 5 $ 23 $ 29,2194,743 37,987 137,1394,755 66,284 5 23 166,358

4,401 674 113,9842,289 213 127 2,629

916 27,221 30 7 62,0665,317 30,184 243 134 178,679

70,348 121,686 17,369 9,564 1,970,60079,244 355,703 50,879 27,538 2,490,017

6,649 6,64911,698 11,698

89 2,2799,535 1,762 238,205

134,575 3 53 134,631159,216 632,073 68,251 37,155 4,854,079

9,116 234,50920 20

178,404 728,561 68,499 37,312 5,433,645

4,510 2,588 118,25264 4,331 6,539

9,116 234,5094,914 4,914

13,690 11,833 364,214

$ 164,714 $ 716,728 $ 68,499 $ 37,312 $ 5,069,431

KentuckyState Police Teachers'Retirement Retirement Totals

System System June 30, 2015

Judicial Legislators'Retirement Retirement

Plan Plan

208

COMMONWEALTH OF KENTUCKYCOMBINING STATEMENT OF CHANGES IN FIDUCIARY NET POSITIONPENSION AND OTHER POST EMPLOYMENT BENEFIT TRUST FUNDS - INSURANCE FUNDS FOR THE YEAR ENDED JUNE 30, 2015(Expressed in Thousands)


Employer $ 135,940 $ 14,882 $ 119,444 $ 71,778Member 272 14 582 10Non-Employer

Total Contributions 136,212 14,896 120,026 71,788

Other Contributions:Recovery Income

Total Other Contributions

Investment Income:Net increase (decrease) in fair value of investments (3,723) (24) 4,701 2,828Interest 15,914 10,473 44,627 24,364DividendsSecurities lending income, net 205 138 604 332

Total Investment Income 12,396 10,587 49,932 27,524

Less: Investment expense 3,682 2,778 13,131 7,202Less: Securities lending expense 24 16 70 39

Net Investment Income 8,690 7,793 36,731 20,283Total Additions 144,902 22,689 156,757 92,071

DeductionsBenefit paymentsRefundsAdministrative expenses 893 100 782 339Self funding insurance cost 2,145 100 3,702 152Healthcare Premiums Subsidies 123,127 16,900 110,032 65,403Other deductions, net 3 6

Total Deductions 126,168 17,100 114,522 65,894

Change in Net Position 18,734 5,589 42,235 26,177

Net Position at July 1 646,905 433,524 1,878,711 1,030,303Net Position at June 30 $ 665,639 $ 439,113 $ 1,920,946 $ 1,056,480 $

Kentucky CountyEmployees' Employees'Retirement Retirement

Non-Hazardous Hazardous Non-Hazardous HazardousSystem System

209

$ 10,382 $ 77,821 $ 1,295 $ $ 431,5421 157,468 168 5 158,520

68,463 68,46310,383 303,752 1,463 5 658,525

22,820 109 69 22,99822,820 109 69 22,998

108 (349) 5,187 2,662 11,3903,960 11,032 429 207 111,006

1,040 570 1,61050 1,329

4,118 10,683 6,656 3,439 125,335

1,191 1,339 53 29,3766 155

2,921 9,344 6,603 3,439 95,80413,304 335,916 8,175 3,513 777,327

4,061 4,0611 3 4

65 1,570 56 73 3,87822 240,375 246,496

13,461 1,970 690 331,5839

13,548 246,006 2,027 766 586,031

(244) 89,910 6,148 2,747 191,296

164,958 626,818 62,351 34,565 4,878,135$ 164,714 $ 716,728 $ 68,499 $ 37,312 $ 5,069,431

KentuckyPolice Teachers'State

Retirement RetirementPlan PlanSystem System

Judicial Legislators'Retirement Retirement Totals

June 30, 2015

210

AGENCY FUNDS

Agency Funds account for monies held by the Commonwealth for custodial purposes only. Kentucky uses the following Agency Funds:

Commonwealth Choice Program - accounts for flexible benefits spending accounts.

County Fees Trust Fund - accounts for monies held by the Commonwealth for those coun-ties with a population greater than 70,000.

Special Deposit Trust Fund - accounts for monies held by the Commonwealth that are marked for specific purposes such as employee withholdings.

211

COMMONWEALTH OF KENTUCKYCOMBINING STATEMENT OF FIDUCIARY NET POSITIONAGENCY FUNDSJUNE 30, 2015(Expressed in Thousands)

AssetsCash and cash equivalents $ 845 $ 415 $ 244,750 $ 246,010Investments, net of amortization 33,099 33,099Invested security collateral 552,146 552,146Receivables, net 2,526 26,443 11,873 40,842

Total Assets $ 3,371 $ 26,858 $ 841,868 $ 872,097

LiabilitiesAccounts payable $ 3,371 $ $ 181,666 $ 185,037Amounts held in custody for others 26,858 108,056 134,914Obligations under securities lending 552,146 552,146

Total Liabilities $ 3,371 $ 26,858 $ 841,868 $ 872,097

TotalsJune 30, 2015

Commonwealth Choice Program

County FeesTrust Fund

Special DepositTrust Fund

212

COMMONWEALTH OF KENTUCKYCOMBINING STATEMENT OF CHANGES IN ASSETS AND LIABILITIESAGENCY FUNDS FOR THE YEAR ENDED JUNE 30, 2015(Expressed in Thousands)

Balances Balances

COMMONWEALTH CHOICE PROGRAM

Cash & cash equivalents-restricted $ 520 $ 325 $ $ 845Accounts receivable 2,531 5 2,526 Total Assets $ 3,051 $ 325 $ 5 $ 3,371

Accounts payable $ 3,051 $ 500 $ 180 $ 3,371 Total Liabilities $ 3,051 $ 500 $ 180 $ 3,371

COUNTY FEES TRUST FUND

Cash & cash equivalents $ 219 $ 196 $ $ 415Accounts receivable 12,598 133,647 119,802 26,443 Total Assets $ 12,817 $ 133,843 $ 119,802 $ 26,858

Amounts held in custody for others $ 12,817 $ 133,843 $ 119,802 $ 26,858 Total Liabilities $ 12,817 $ 133,843 $ 119,802 $ 26,858

SPECIAL DEPOSIT TRUST FUND

Cash & cash equivalents $ 241,229 $ 906,531 $ 903,010 $ 244,750Investments 17,086 33,203 17,190 33,099Invested security collateral 673,249 121,103 552,146Accounts receivable 4,479 12,723 5,329 11,873 Total Assets $ 936,043 $ 952,457 $ 1,046,632 $ 841,868

Accounts payable $ 176,690 $ 892,338 $ 887,362 $ 181,666Amounts held in custody for others 86,104 108,056 86,104 108,056Obligations under securities lending 673,249 121,103 552,146 Total Liabilities $ 936,043 $ 1,000,394 $ 1,094,569 $ 841,868

ALL AGENCY FUNDS

Cash & cash equivalents $ 241,968 $ 907,052 $ 903,010 $ 246,010Investments 17,086 33,203 17,190 33,099Invested security collateral 673,249 121,103 552,146Accounts receivable 19,608 146,370 125,136 40,842 Total Assets $ 951,911 $ 1,086,625 $ 1,166,439 $ 872,097

Accounts payable $ 179,741 $ 892,838 $ 887,542 $ 185,037Amounts held in custody for others 98,921 241,899 205,906 134,914Obligations under securities lending 673,249 121,103 552,146 Total Liabilities $ 951,911 $ 1,134,737 $ 1,214,551 $ 872,097

June 30, 2014 June 30, 2015DeductionsAdditions

Liabilities

Assets

Liabilities

Liabilities

Assets

Liabilities

Assets

Assets

213

NON-MAJOR COMPONENT UNITS - COMBINING

214

COMMONWEALTH OF KENTUCKYCOMBINING STATEMENT OF NET POSITIONNON-MAJOR COMPONENT UNITSFOR THE YEAR ENDED JUNE 30, 2015(Expressed in Thousands)


Cash and cash equivalents $ 104,946 $ 331,240 $ 436,186Restricted cash 11,041 59,035 70,076Investments, net of amortization 386,899 386,899Accounts receivable, net 111,148 88,044 199,192Interest receivable 2,056 72 2,128Inventories 1,505 6,795 8,300Prepaid expenses 1,312 14,399 15,711Other current assets 1,950 3,793 5,743

Total Current Assets 620,857 503,378 1,124,235

Noncurrent assets:Restricted cash 62,751 146,231 208,982Long-term investments 33,613 177,364 210,977Restricted long-term investments 15,308 289,321 304,629Long-term receivables, net 916,410 20,550 936,960Land 29,753 70,998 100,751Improvements other than buildings 65,199 178,814 244,013Buildings 458,245 2,218,046 2,676,291Machinery and equipment 98,982 333,708 432,690Other capital assets 10,764 131,699 142,463

Less: Accumulated depreciationand amortization (310,388) (1,322,573) (1,632,961)

Construction in progress 14,832 105,997 120,829Total Capital Assets 367,387 1,716,689 2,084,076

Other assets 4,460 14,110 18,570Total Noncurrent Assets 1,399,929 2,364,265 3,764,194

Total Assets 2,020,786 2,867,643 4,888,429Deferred outflows of resources 12,345 75,273 87,618


Accounts payable and accruals 21,929 64,252 86,181Current portion of long-term debt:

Notes payable 410 14,976 15,386Bonds payable 26,527 30,840 57,367Capital lease obligations 6,946 4,954 11,900Compensated absences 1,961 23,668 25,629Claims liability 1,999 1,999

Unearned revenues 7,197 30,984 38,181Payable from restricted assets 6,366 6,366Other current liabilities 3,417 18,018 21,435


Noncurrent liabilities:Notes payable 3,579 18,184 21,763Bonds payable 287,128 558,680 845,808Capital lease obligations 68,164 66,474 134,638Compensated absences 708 224 932Net pension liability 114,584 1,547,931 1,662,515Other long-term liabilities 87 59,133 59,220

Total Noncurrent Liabilities 474,250 2,250,626 2,724,876Total Liabilities 542,637 2,446,683 2,989,320

Deferred inflows of resources 8,552 77,640 86,192

Net PositionNet investment in capital assets 283,810 1,019,477 1,303,287Restricted for:

Debt service 2,503 2,503Capital projects 13,045 44,204 57,249Other purposes 1,154,469 518,729 1,673,198

Unrestricted 30,618 (1,166,320) (1,135,702)Total Net Position $ 1,481,942 $ 418,593 $ 1,900,535

Non-Major Non-Major

TotalsComponent Component

June 30, 2015Authorities UniversitiesUnits - Units -

215

COMMONWEALTH OF KENTUCKYCOMBINING STATEMENT OF ACTIVITIESNON-MAJOR COMPONENT UNITSFOR THE YEAR ENDED JUNE 30, 2015(Expressed in Thousands)

Expenses:Operating and other expenses $ 396,444 $ 1,376,616 $ 1,773,060

Total expenses 396,444 1,376,616 1,773,060

Program Revenues:Charges for services 98,887 665,841 764,728Operating grants and contributions 240,605 128,077 368,682Capital grants and contributions 9,450 2,657 12,107

Total Program Revenues 348,942 796,575 1,145,517Net Program (Expense) Revenue (47,502) (580,041) (627,543)

General Revenues:Unrestricted grants and contributions 33,810 185,868 219,678Unrestricted investment earnings 1,898 10,698 12,596Gain on sale of capital assets 3 48 51Miscellaneous general 47,564 378,267 425,831

Total General Revenues 83,275 574,881 658,156

Change in Net Position 35,773 (5,160) 30,613

Net Position at July 1, As Restated 1,446,169 423,753 1,869,922Net Position at June 30 $ 1,481,942 $ 418,593 $ 1,900,535

June 30, 2015Totals

Non-Major Non-Major

Authorities UniversitiesUnits - Units -

Component Component

217

NON-MAJOR COMPONENT UNITS - AUTHORITIES

Kentucky River Authority – is responsible for the maintenance of the Commonwealth’s locks and dams on the Kentucky River.

Kentucky Higher Education Assistance Authority - was established by KRS 164.742 to improve higher education opportunities by insuring eligible student loans and providing grants and scholarship awards to eligible students.

Bluegrass State Skills Corporation - established to improve and promote the employment opportunities of the citizens of the Com-monwealth by assisting the Economic Development Cabinet in creating and expanding programs of skill, training and education.

Kentucky State Fair Board - accounts for the revenues earned and expenses incurred in the commercial operations of the State Fair Board.

Kentucky Center for the Arts Corporation - established by the General Assembly to promote the growth and development of the arts, convention trade, tourism and hotel industries within Jefferson County and the Commonwealth. The Center has the responsibility of maintaining, operating and insuring the Kentucky Center for the Arts building.

Kentucky Authority for Educational Television - established by KRS 168.030 to produce and transmit educational television program-ming to the citizens of the Commonwealth.

Kentucky Economic Development Finance Authority - established in 1958 under KRS Chapter 154 to promote industrial development, and authorized to issue industrial revenue bonds that do not constitute a legal or moral obligation of the Commonwealth.

Kentucky Artisan Center - established to celebrate Kentucky's artisan heritage and encourage Kentuckians and those traveling in Ken-tucky to enjoy artisan products and activities.

Kentucky Infrastructure Authority - established in 1988 by KRS 224A.030, and amended, to assume all powers, duties and obligations of the Kentucky Pollution Abatement and Water Resources Finance Authority in assisting governmental agencies within the Common-wealth in constructing and acquiring infrastructure projects.

Kentucky Agricultural Finance Corporation - created by the 1984 General Assembly to “improve and promote the health, welfare and prosperity of the people of the Commonwealth through stimulation of existing agricultural ventures.” This corporation helps banks and other financial institutions assist eligible farmers in receiving low interest loans through the issuance of tax-exempt agricultural revenue bonds.

Kentucky Grain Insurance Corporation - provides protection to grain producers in the event of the failure of a grain dealer or grain warehouseman. Kentucky Local Correctional Facilities Construction Authority - created in 1982 pursuant to Sections 441.605 through 441.695 of the KRS to provide an additional and alternative method for constructing, improving, repairing, and financing regional and local jail facilities.

Kentucky Horse Park Foundation – is a legally separate tax-exempt Kentucky corporation that receives, holds, and administers gifts and grants in the name of the Kentucky Horse Park.

218

COMMONWEALTH OF KENTUCKYCOMBINING STATEMENT OF NET POSITIONNON-MAJOR COMPONENT UNITS - AUTHORITIESJUNE 30, 2015(Expressed in Thousands)


Cash and cash equivalents $ 1,083 $ 20,575 $ $ 13,797Restricted cash 11,041Investments, net of amortization 9,673Accounts receivable, net 1,084 8,785 1,534 3,024Interest receivable 248InventoriesPrepaid expenses 779Other current assets 450

Total Current Assets 13,208 39,731 1,534 17,600

Noncurrent assets:Restricted cash 62,221Long-term investmentsRestricted long-term investmentsLong-term receivables, net 10,964Land 546 27,835Improvements other than buildings 52,644 12,555Buildings 12,075 390,738Machinery and equipment 3,359 25,077Other capital assets 9,450 Less: Accumulated depreciation and amortization (10,906) (7,223) (194,629)Construction in progress 12,011 2,793 Total Capital Assets 54,295 8,211 273,819Other assets Total Noncurrent Assets, Net 54,295 81,396 273,819

Total Assets 67,503 121,127 1,534 291,419Deferred outflows of resources 119 475 24 2,897


Accounts payable and accruals 479 1,181 1,529 15,235Current portion of long-term debt: Notes payable Bonds payable Capital lease obligations 1,110 580 5,208 Compensated absences 72 657 5

Unearned revenues 4,153Other current liabilities

Total Current Liabilities 1,661 2,418 1,534 24,596

Noncurrent liabilities:Notes payableBonds payableCapital lease obligations 25,139 2,630 40,278Compensated absences 40 9Net pension liability 2,415 9,093 418 49,277Other long-term liabilities

Total Noncurrent Liabilities 27,594 11,723 427 89,555 Total Liabilities 29,255 14,141 1,961 114,151Deferred inflows of resources 31 117 6 4,549

Net PositionNet investment in capital assets 27,685 5,001 224,425

Restricted for: Capital projects 11,041

Other purposes 102,343Unrestricted (390) (409) (48,809)Total Net Position $ 38,336 $ 107,344 $ (409) $ 175,616

KentuckyRiver

Authority CorporationState Skills

Authority

KentuckyState Fair

Board

Bluegrass

KentuckyHigher

EducationAssistance

219

$ 1,531 $ 5,649 $ 21,980 $ 15 $ 29,189 $ 7,458

242 10,999 123 363,939303 1,996 1,137 17 56,078 37,09614 25 33 1,73680 1,088 337

323 210110 1,380 10

2,493 20,077 24,530 492 450,952 44,554

53016,530 278 11,029 4,995

7,804 2,481150 55 18,639 886,602129 76 1,167

31,571 16,733 6,70633,907 34,343 963

1,314

(49,480) (45,169) (1,687)28

16,127 7,325 7,1494,428 32

37,235 15,746 18,917 7,149 900,112 4,99539,728 35,823 43,447 7,641 1,351,064 49,549

2,980 307 178 5,331 34

911 1,219 153 101 1,075 15

96 11726,527

48221 828 89 67 22668 2,37355 16 3,346

1,999 4,537 258 168 30,948 37

2,320 1,259287,128

117488 127 37 7

40,752 4,632 3,206 4,214 577

2,437 42,499 4,759 3,243 291,342 5844,436 47,036 5,017 3,411 322,290 621

3,457 60 41 284 7

13,140 5,949 7,149

2,0043,089 7,285 5,560 1,033,821

19,063 (26,928) 33,117 (2,782) 48,955$ 35,292 $ (11,690) $ 38,677 $ 4,367 $ 1,033,821 $ 48,955

KentuckyKentucky

AuthorityFinance

DevelopmentEconomic Kentucky

AuthorityEducationalTelevision

Financethe ArtsAuthority for Kentucky

CorporationCorporation

Center for KentuckyArtisanCenter

AgriculturalKentucky

Infrastructure

Continued

220

COMMONWEALTH OF KENTUCKYCOMBINING STATEMENT OF NET POSITIONNON-MAJOR COMPONENT UNITS - AUTHORITIESJUNE 30, 2015(Expressed in Thousands)


Cash and cash equivalents $ 2,871 $ $ 798 $ 104,946Restricted cash 11,041Investments, net of amortization 1,923 386,899Accounts receivable, net 94 111,148Interest receivable 2,056Inventories 1,505Prepaid expenses 1,312Other current assets 1,950

Total Current Assets 4,794 892 620,857

Noncurrent assets:Restricted cash 62,751Long-term investments 781 33,613Restricted long-term investments 5,023 15,308Long-term receivables, net 916,410Land 29,753Improvements other than buildings 65,199Buildings 422 458,245Machinery and equipment 1,333 98,982Other capital assets 10,764Less: Accumulated depreciation and amortization (1,294) (310,388)Construction in progress 14,832 Total Capital Assets 461 367,387Other assets 4,460 Total Noncurrent Assets, Net 6,265 1,399,929

Total Assets 4,794 7,157 2,020,786Deferred outflows of resources 12,345


Accounts payable and accruals 31 21,929Current portion of long-term debt: Notes payable 197 410 Bonds payable 26,527 Capital lease obligations 6,946 Compensated absences 1,961

Unearned revenues 3 7,197Other current liabilities 3,417

Total Current Liabilities 231 68,387

Noncurrent liabilities:Notes payable 3,579Bonds payable 287,128Capital lease obligations 68,164Compensated absences 708Net pension liability 114,584Other long-term liabilities 87 87

Total Noncurrent Liabilities 87 474,250 Total Liabilities 318 542,637Deferred inflows of resources 8,552

Net PositionNet investment in capital assets 461 283,810

Restricted for: Capital projects 13,045

Other purposes 2,371 1,154,469Unrestricted 4,794 4,007 30,618Total Net Position $ 4,794 $ $ 6,839 $ 1,481,942

Correctional The KentuckyHorse ParkFoundation,Insurance

Corporation June 30, 2015AuthorityConstruction

Facilities

Inc.Totals

Kentucky Local

GrainKentucky

222

COMMONWEALTH OF KENTUCKYCOMBINING STATEMENT OF ACTIVITIESNON-MAJOR COMPONENT UNITS - AUTHORITIESFOR THE YEAR ENDED JUNE 30, 2015(Expressed in Thousands)

Expenses:Operating and other expenses $ 4,100 $ 233,616 $ 3,011 $ 61,743

Total expenses 4,100 233,616 3,011 61,743

Program Revenues:Charges for services 4,235 24,447 43,662Operating grants and contributions 214,726Capital grants and contributions 9,450

Total Program Revenues 4,235 239,173 53,112Net Program (Expense) Revenue 135 5,557 (3,011) (8,631)

General Revenues:Unrestricted grants and contributionsUnrestricted investment earnings 13 24Gain on sale of capital assetsMiscellaneous general 263 3,010 9,497

Total General Revenues 276 3,010 9,521

Change in Net Position 411 5,557 (1) 890

Net Position at July 1, As Restated 37,925 101,787 (408) 174,726Net Position at June 30 $ 38,336 $ 107,344 $ (409) $ 175,616

BluegrassState SkillsCorporation

Kentucky Kentucky

AuthorityRiver

Authority BoardAssistance State FairEducation

KentuckyHigher

223

$ 15,045 $ 28,747 $ 4,609 $ 2,601 $ 34,817 $ 27115,045 28,747 4,609 2,601 34,817 271

7,083 2,365 999 1,646 13,1431,978 11,440 782 10,687

9,061 13,805 999 2,428 13,143 10,687(5,984) (14,942) (3,610) (173) (21,674) 10,416

456 33,257526 502 2 459

34,112 15,338 15,1695,097 15,840 2 48,885

(887) 898 (3,608) (173) 27,211 10,416

36,179 (12,588) 42,285 4,540 1,006,610 38,539$ 35,292 $ (11,690) $ 38,677 $ 4,367 $ 1,033,821 $ 48,955

Kentucky

Center

Kentucky

Authority Corporation

AgriculturalKentuckyFinanceInfrastructureArtisanFinanceEducational

Development

Authority

Authority for

Corporationthe Arts

Television

Center for

KentuckyKentucky EconomicKentucky

Continued

224

COMMONWEALTH OF KENTUCKYCOMBINING STATEMENT OF ACTIVITIESNON-MAJOR COMPONENT UNITS - AUTHORITIESFOR THE YEAR ENDED JUNE 30, 2015 (Expressed in Thousands)

Expenses:Operating and other expenses $ 5 $ 6,511 $ 1,368 $ 396,444

Total expenses 5 6,511 1,368 396,444

Program Revenues:Charges for services 709 598 98,887Operating grants and contributions 992 240,605Capital grants and contributions 9,450

Total Program Revenues 709 1,590 348,942Net Program (Expense) Revenue (5) (5,802) 222 (47,502)

General Revenues:Unrestricted grants and contributions 97 33,810Unrestricted investment earnings 6 26 340 1,898Gain on sale of capital assets 3Miscellaneous general 175 47,564

Total General Revenues 6 26 612 83,275

Change in Net Position 1 (5,776) 834 35,773

Net Position at July 1, As Restated 4,793 5,776 6,005 1,446,169Net Position at June 30 $ 4,794 $ $ 6,839 $ 1,481,942

The KentuckyCorrectional

Foundation, Inc.

FacilitiesKentucky

Kentucky Local

GrainInsurance

Corporation June 30, 2015AuthorityConstruction Totals

Horse Park

225

COMMONWEALTH OF KENTUCKYCOMBINING STATEMENT OF CASH FLOWSNON-MAJOR COMPONENT UNITS-AUTHORITIESFOR THE YEAR ENDED JUNE 30, 2015(Expressed in Thousands)

Kentucky KentuckyAgricultural Grain

Finance Insurance TotalsCorporation Corporation

Cash Flows from Operating ActivitiesCash payments to suppliers for goods and services $ (75) $ (5) $ (80)Cash payments for employee salaries and benefits (183) (183)Cash payments from other sources 6,687 6,687

Net Cash Provided (Used) by Operating Activities 6,429 (5) 6,424

Cash Flows from Investing ActivitiesPurchase of investment securities (2,924) (275) (3,199)Interest and dividends on investments 6 6

Net Cash Provided (Used) in Investing Activities (2,924) (269) (3,193)

Net Increase (Decrease) in Cash and Cash Equivalents 3,505 (275) 3,231Cash and Cash Equivalents at July 1 3,953 3,146 7,099Cash and Cash Equivalents at June 30 $ 7,458 $ 2,871 $ 10,330

Reconciliation of Operating Income to Net Cash Provided (Used) by Operating Activities:

Operating income (loss) $ 10,416 $ (5) $ 10,411Adjustments to reconcile operating income to

net cash provided by operating activities:Change in assets and liabilities:

(Increase) Decrease in assets:Receivables, net (4,000) (4,000)

(Increase) Decrease in deferred outflow (14) (14)Increase (decrease) in liabilities:

Accounts payable 2 2Compensated absences 1 1Pension liabilities 17 17

Increase (decrease) in deferred inflow 7 7Net Cash Provided (Used) by Operating Activities $ 6,429 $ (5) $ 6,424

June 30, 2015

227

NON-MAJOR COMPONENT UNITS - UNIVERSITIES,COLLEGES, AND RELATED ENTITIES

Universities, Colleges, and Related Entities

The Universities, Colleges, and Related Entities Funds account for all transactions relating to the State supported universities and the community colleges and technical schools. These institutions maintain their own financial records and are not part of the central accounting system operated by the Finance and Administration Cabinet. The non-major component units-universities are:

Eastern Kentucky UniversityWestern Kentucky UniversityMorehead State UniversityMurray State UniversityNorthern Kentucky UniversityKentucky State University

Kentucky Council on Postsecondary Education – established in 1997 by the Postsecondary Education Improvement Act to coordinate changes and improvements within Kentucky’s postsec-ondary education system.

228

COMMONWEALTH OF KENTUCKYCOMBINING STATEMENT OF NET POSITIONNON-MAJOR COMPONENT UNITS - UNIVERSITIES, COLLEGES, AND RELATED ENTITIESJUNE 30, 2015(Expressed in Thousands)


Cash and cash equivalents $ 62,651 $ 72,744 $ 20,528Restricted cash 42,674Accounts receivable, net 18,220 19,425 10,871Interest receivable 53 2Inventories 374 2,257 1,635Prepaid expenses 2,232 5,614Other current assets 222 395 1,020


Noncurrent assets:Restricted cash 26,979 9,690Long-term investments 60,739 48,875 44,193Restricted long-term investments 87,736Long-term receivables, net 4,824 10,064 3,731Land 8,088 15,628 22,935Improvements other than buildings 56,593 66,626Buildings 429,637 668,584 279,147Machinery and equipment 25,197 141,926 25,282Other capital assets 44,172 34,066

Less: Accumulated depreciationand amortization (239,184) (344,712) (167,399)

Construction in progress 16,557 25,744 6,411Total Capital Assets 341,060 573,796 200,442

Other assets 6,782 3,846Total Noncurrent Assets, Net 433,602 736,943 252,212

Total Assets 517,301 837,431 328,942Deferred outflows of resources 16,755 18,931 8,370


Accounts payable and accruals 14,462 11,927 4,347Current portion of long-term debt:

Notes payable 266 13,425Bonds payable 5,949 11,322 3,562Capital lease obligations 1,695 504 1,057Compensated absences 5,933 3,139 3,089Claims liability 1,215

Unearned revenues 7,665 9,049 3,921Payable from restricted assets 360Other current liabilities 939 6,382 1,219


Noncurrent liabilities:Notes payable 849 7,762Bonds payable 66,945 206,696 80,414Capital lease obligations 33,525 16,737 12,188Compensated absencesNet pension liability 381,105 402,061 194,699Other long-term liabilities 349 38,121 4,648

Total Noncurrent Liabilities 482,773 671,377 291,949Total Liabilities 519,682 728,340 309,504

Deferred inflows of resources 19,351 21,895 13,231

Net PositionNet investment in capital assets 229,072 285,279 100,113Restricted for:

Debt serviceCapital projects 26,051 16,315Other purposes 66,620 133,310 91,148

Unrestricted (326,720) (328,777) (176,684)Total Net Position $ (4,977) $ 106,127 $ 14,577

EasternKentuckyUniversity

WesternKentuckyUniversity

MoreheadState

University

229

$ 60,298 $ 89,751 $ 24,979 $ 289 $ 331,24013,700 2,661 59,035

9,642 12,148 13,054 4,684 88,04417 72

2,170 359 6,7951,995 2,291 144 2,123 14,3992,156 3,793

76,261 118,266 38,177 9,757 503,378

86,407 23,155 146,2314,244 15,583 3,730 177,364

103,165 97,090 1,330 289,3211,421 510 20,550

12,274 9,785 2,288 70,99815,373 36,235 3,987 178,814

280,378 405,492 154,808 2,218,04631,184 87,697 21,852 570 333,70833,131 4,622 15,708 131,699

(202,089) (246,169) (122,663) (357) (1,322,573)17,845 38,296 1,144 105,997

188,096 335,958 77,124 213 1,716,6893,325 121 36 14,110

380,993 461,989 93,253 5,273 2,364,265457,254 580,255 131,430 15,030 2,867,643

12,386 13,446 4,390 995 75,273

10,263 13,943 4,399 4,911 64,252

1,214 21 50 14,9763,324 6,468 215 30,840

56 1,128 514 4,9546,425 3,143 1,311 628 23,668

617 167 1,9993,433 6,024 874 18 30,984

6,006 6,3669,007 194 277 18,018

34,339 36,927 7,807 5,557 196,057

9,378 45 150 18,18478,225 123,467 2,933 558,680

152 1,089 2,783 66,474224 224

233,581 224,378 93,542 18,565 1,547,93115,480 535 59,133

321,336 364,459 99,943 18,789 2,250,626355,675 401,386 107,750 24,346 2,446,683

12,051 5,515 5,164 433 77,640

123,222 211,344 70,447 1,019,477

2,299 204 2,5031,625 213 44,204

95,220 103,702 23,141 5,588 518,729(118,827) (130,075) (70,682) (14,555) (1,166,320)

$ 101,914 $ 186,800 $ 22,906 $ (8,754) $ 418,593

University

MurrayState

University

Kentucky Councilon Postsecondary

EducationTotals

June 30, 2015

NorthernKentuckyUniversity

KentuckyState

230

COMMONWEALTH OF KENTUCKYCOMBINING STATEMENT OF ACTIVITIESNON-MAJOR COMPONENT UNITS - UNIVERSITIES, COLLEGES, AND RELATED ENTITIESFOR THE YEAR ENDED JUNE 30, 2015(Expressed in Thousands)

Expenses:Operating and other expenses $ 296,867 $ 361,257 $ 163,714

Total Expenses 296,867 361,257 163,714

Program Revenues:Charges for services 130,502 200,930 63,989Operating grants and contributions 50,647 9,392 16,700Capital grants and contributions

Total Program Revenues 181,149 210,322 80,689Net Program (Expense) Revenue (115,718) (150,935) (83,025)

General Revenues:Unrestricted grants and contributions 42,640 60,949 26,384Unrestricted investment earnings (612) 6,112 66Gain on sale of capital assets 48Miscellaneous general 75,225 83,356 48,885Total General Revenues 117,253 150,465 75,335

Change in Net Position 1,535 (470) (7,690)

Net Position at July 1, As Restated (6,512) 106,597 22,267Net Position at June 30 $ (4,977) $ 106,127 $ 14,577

MoreheadState

University

EasternKentuckyUniversity

WesternKentuckyUniversity

231

$ 188,843 $ 235,189 $ 69,653 $ 61,093 $ 1,376,616188,843 235,189 69,653 61,093 1,376,616

118,170 133,380 18,085 785 665,8416,304 12,778 16,767 15,489 128,077

2,019 638 2,657124,474 148,177 34,852 16,912 796,575(64,369) (87,012) (34,801) (44,181) (580,041)

22,346 28,496 5,053 185,8684,164 238 730 10,698

4853,622 50,872 24,142 42,165 378,26780,132 79,606 29,925 42,165 574,881

15,763 (7,406) (4,876) (2,016) (5,160)

86,151 194,206 27,782 (6,738) 423,753$ 101,914 $ 186,800 $ 22,906 $ (8,754) $ 418,593

TotalsJune 30, 2015

NorthernKentuckyUniversity

Kentucky Kentucky Councilon Postsecondary

MurrayState

UniversityState

EducationUniversity

233

STATISTICAL SECTION

This part of the Commonwealth of Kentucky’s comprehensive annual financial report presents detailed information as a context for understanding what the information in the financial statements, note disclosures, and required supplementary information says about the Commonwealth’s overall financial health.

Financial Trends

The schedules presented in this section contain trend information to help the reader understand how the Commonwealth’s financial perfor-mance and fiscal health has changed over time. Fund perspective statements are presented for the last ten fiscal years, except where noted.

Revenue Capacity

The schedules presented in this section contain information to help the reader assess the Commonwealth’s most significant revenue source, which is personal income tax.

Debt Capacity

The schedules presented in this section contain information to help the reader assess the affordability of the Commonwealth’s current levels of outstanding debt, and the Commonwealth’s ability to issue additional debt in the future.

Demographic Information

The schedules presented in this section offer demographic and economic indicators to help the reader understand the environment within the Commonwealth and the financial impact of those activities.

Operating Information

The schedules presented in this section offer operating data to help the reader understand how the information in the Commonwealth’s financial report relates to the services it provided and the activities performed by the governmental agencies.

234

COMMONWEALTH OF KENTUCKYFUND BALANCES - GOVERNMENTAL FUNDSFOR THE LAST TEN FISCAL YEARS(Expressed in Thousands)

2015 2014 2013 2012General Fund

Nonspendable:Inventories $ 6,230 $ 6,505 $ 7,299 $ 5,515

Assigned 27,069 34,700 35,563Unassigned 71,060 (137,295) 159,198 54,035

Total General Fund 104,359 (130,790) 201,197 95,113

All Other Governmental FundsNonspendable:

Inventories 74,105 54,006 81,264 86,240Cash with Fiscal Agents 18,954 13,503 17,918 29,045

Restricted 1,706,764 2,068,293 2,373,349 2,452,952Committed 160,804 188,706 175,676 183,414Assigned 15,033 13,054 7,019 13,157Unassigned (59,950) (2,582) (596,756) (420,183)

Total All Other Governmental Funds 1,915,710 2,334,980 2,058,470 2,344,625

Total Fund Balances - Governmental Funds $ 2,020,069 $ 2,204,190 $ 2,259,667 $ 2,439,738

Note: In FY 2010, the fund balance categories were reclassified as a result of implementing GASB 54.

General Fund:ReservedUnreserved

Total General Fund

All Other Governmental Funds:ReservedUnreserved, reported in:

Debt Service FundSpecial Revenue FundsCapital Projects Funds

Total All Other Governmental Funds

Note: Information is presented on the modified accrual basis of accounting.

235

2011 2010

$ 6,099 $ 5,079 57,456 71,975

249,482 9,150 313,037 86,204

49,078 54,290 67,469 80,576

2,165,308 1,833,356 148,636 161,548

27,034 15,641 (120,235) (65,628)

2,337,290 2,079,783

$ 2,650,327 $ 2,165,987

2009 2008 2007 2006

$ 80,135 $ 290,108 $ 295,917 $ 183,555(49,698) (1,937) 517,277 713,339

$ 30,437 $ 288,171 $ 813,194 $ 896,894

$ 882,654 $ 919,085 $ 704,496 $ 597,827

309,234 369,603 381,313 377,202719,767 786,125 1,031,387 1,394,633

45,585 72,094 (66,785) (129,103)$ 1,957,240 $ 2,146,907 $ 2,050,411 $ 2,240,559

236

COMMONWEALTH OF KENTUCKYNotes to Required Supplementary InformationJune 30, 2004

COMMONWEALTH OF KENTUCKYCHANGES IN FUND BALANCE, GOVERNMENTAL FUNDSFOR THE LAST TEN FISCAL YEARS(Expressed in Thousands)

2015 2014 2013 2012RevenuesTaxes $ 11,492,919 $ 10,954,839 $ 10,813,909 $ 10,403,782Licenses, fees, and permits 386,757 350,454 337,431 339,642Intergovernmental 10,135,711 9,008,083 7,143,403 7,098,675Charges for services 1,173,174 1,276,821 1,175,388 1,117,177Fines and forfeits 64,755 69,531 80,227 80,132Interest and other investment income 31,747 26,785 13,403 30,822Increase (decrease) in fair value

of investments (13,544) (9,410) (7,661) (18,705)Securities lending income 2,664 2,696 4,198 3,121Other revenues 518,844 627,647 678,358 562,394

Total Revenues 23,793,027 22,307,446 20,238,656 19,617,040


General government 2,107,483 2,067,170 2,282,198 2,390,204Legislative and judicial 437,109 419,461 406,800 409,685Commerce 98,826 97,811 92,312 112,139Education and humanities 5,347,187 5,317,501 5,384,681 5,322,439Human resources 11,437,873 10,399,966 7,963,372 7,984,895Justice 839,455 804,747 825,194 802,108Natural resources and

environmental protection 186,641 185,547 201,048 213,283Public protection and regulation 103,448 92,600 158,617 157,846Transportation 2,661,224 2,566,382 2,263,175 2,109,125

Debt Service:Principal retirement 571,281 547,610 534,078 306,504Interest and fiscal charges 352,558 355,438 354,688 367,966Other expenditures 20,431 9,858 12,763 55,983

Securities lending expense 1,190 1,058 2,362 1,593Capital outlay:

Buildings 231,483 203,514 330,795 253,894Total Expenditures 24,396,189 23,068,663 20,812,083 20,487,664

Excess (Deficiency) of Revenuesover (under) Expenditures (603,162) (761,217) (573,427) (870,624)

Other Financing Sources (Uses)Transfers in 2,058,253 2,021,428 1,810,448 1,539,696Transfers out (2,009,118) (2,013,769) (1,833,096) (1,530,423)Capitalized leases 17,070 27 10,007 9,546Issuance of bonds:

New issues 222,922 256,887 221,310 419,700Refunding issues 373,712 141,631 127,644 527,118Premiums 76,777 80,769 27,295 74,049Discounts (972) (689) (408) (927)

Certificates of participation 68,575Premiums 1,621

Issuance of notes:New issues 383,000 163,290 82,717Refunding issues 39,765

Payments to refunded bondescrow agent (409,405) (189,883) (127,035) (455,473)

Total Other Financing Sources (Uses) 399,435 719,166 399,455 666,003

Net Change in Fund Balances $ (203,727) $ (42,051) $ (173,972) $ (204,621)

Debt service as a percentage of noncapital expenditures 3.78% 3.91% 4.29% 3.31%

Note: Information is presented on the modified accrual basis of accounting.

237

COMMONWEALTH OF KENTUCKYNotes to Required Supplementary InformationJune 30, 2004

2011 2010 2009 2008 2007 2006

$ 10,113,502 $ 9,366,175 $ 9,560,283 $ 9,871,590 $ 9,668,573 $ 9,465,785330,263 330,387 323,012 309,413 303,849 294,575

8,016,458 8,381,546 7,055,624 6,169,116 5,810,270 5,662,112911,202 803,961 774,553 758,805 752,532 781,105

82,856 86,980 90,812 97,898 80,741 90,11829,092 45,214 67,076 149,833 163,833 111,894

795 (150) (4) 6,529 11,241 (5,799)1,966 1,711 11,060 31,576 36,673 39,918

822,936 492,508 461,824 474,555 517,266 597,08820,309,070 19,508,332 18,344,240 17,869,315 17,344,978 17,036,796

2,302,228 2,592,283 2,472,452 2,702,730 2,591,176 2,444,023392,791 378,475 359,666 338,839 303,799 302,303

86,506 92,437 94,989 100,535 96,572 81,0376,125,603 5,104,048 4,860,442 4,800,460 4,554,565 4,395,9488,088,667 8,124,836 7,919,632 7,301,114 6,764,174 6,602,797

789,602 782,443 737,997 767,270 727,178 710,142

200,899 193,111 188,039 192,957 195,980 171,407163,438 115,857 120,406 97,482 98,517 67,329

1,959,030 2,014,490 1,977,924 2,090,584 1,825,318 1,661,585

308,484 386,212 299,940 341,733 285,809 246,404351,539 306,139 252,466 210,331 200,297 174,972

8,002 27,335 25,036 21,025 15,960 26,6491,163 933 6,080 26,774 35,318 38,144

466,335 609,309 442,315 582,550 583,302 446,85521,244,287 20,727,908 19,757,384 19,574,384 18,277,965 17,369,595

(935,217) (1,219,576) (1,413,144) (1,705,069) (932,987) (332,799)

1,852,945 1,955,274 2,157,662 2,357,766 2,216,889 2,124,893(1,675,200) (1,776,171) (1,880,360) (2,258,283) (2,041,824) (1,969,206)

6,864 10,182 4,456 3,280 7,364 6,079

472,123 873,326 655,350 372,135 159,140 445,350240,590 347,835 508,520 100,000 105,085

34,035 37,442 35,905 46,322 16,610 21,416(2,022) (2,619) (4,193)

737,370 89,710 750,085 520,354 (58)

(233,642) (186,602) (508,320) (100,000) (330,193)1,433,063 1,358,253 969,020 1,271,305 653,425 628,474

$ 497,846 $ 138,677 $ (444,124) $ (433,764) $ (279,562) $ 295,675

3.11% 3.34% 2.89% 2.94% 2.57% 2.49%

238

COMMONWEALTH OF KENTUCKYNET POSITION BY COMPONENTFOR THE LAST TEN FISCAL YEARS(Expressed in Thousands)

2015 2014 2013 2012Governmental Activities:

Invested in capital assets,net of related debt $ 21,288,572 $ 20,986,040 $ 20,195,976 $ 19,616,044

Restricted 984,229 1,099,649 1,167,435 1,480,299Unrestricted (36,414,312) (11,812,580) (10,315,863) (9,731,379)

Total Governmental Activities Net Position (14,141,511) 10,273,109 11,047,548 11,364,964

Business-type Activities:Invested in Capital Assets,

net of related debt 303,571 315,131 328,382 334,611Restricted 212,629 63,847 913 729Unrestricted (403,957) (594,125) (876,277) (1,014,186)

Total Business-Type Activities Net Position 112,243 (215,147) (546,982) (678,846)

Primary Government:Invested in capital assets,

net of related debt 21,592,143 21,301,171 20,524,358 19,950,655Restricted 1,196,858 1,163,496 1,168,348 1,481,028Unrestricted (36,818,269) (12,406,705) (11,192,140) (10,745,565)

Total Primary Government Net Position $ (14,029,268) $ 10,057,962 $ 10,500,566 $ 10,686,118

NOTE: This schedule is presented on the accrual basis of accounting.

239

2011 2010 2009 2008 2007 2006

$ 19,153,511 $ 18,418,874 $ 19,547,435 $ 19,911,942 $ 17,947,656 $ 17,633,8861,286,431 1,206,293 1,094,433 1,139,727 1,237,151 1,376,301

(8,071,118) (6,803,987) (5,861,735) (4,816,142) (1,807,615) (1,191,204)

12,368,824 12,821,180 14,780,133 16,235,527 17,377,192 17,818,983

350,505 341,172 330,078 290,365 267,144 254,623326 9,646 5,615 310,216 359,605 392,318

(1,199,294) (1,151,091) (859,772) (553,995) (634,297) (612,782)

(848,463) (800,273) (524,079) 46,586 (7,548) 34,159

19,504,016 18,760,046 19,877,513 20,202,307 18,214,800 17,888,5091,286,757 1,215,939 1,100,048 1,449,943 1,596,756 1,768,619

(9,270,412) (7,955,078) (6,721,507) (5,370,137) (2,441,912) (1,803,986)

$ 11,520,361 $ 12,020,907 $ 14,256,054 $ 16,282,113 $ 17,369,644 $ 17,853,142

240

COMMONWEALTH OF KENTUCKYGOVERNMENT-WIDE EXPENSES, PROGRAM REVENUES, AND NET (EXPENSE)/REVENUEFOR THE LAST TEN FISCAL YEARS(Expressed in Thousands)

2015 2014 2013 2012Function/Program RevenuesPrimary Government:Governmental Activities: Charges for Services:

General government $ 626,337 $ 699,518 $ 681,819 $ 668,709Legislative and judicial 25,866 25,584 25,676 21,750Commerce 58,617 44,538 41,337 53,375Education and humanities 64,776 43,192 67,290 66,246Human Resources 164,793 230,057 16,593Justice 22,755 23,434 27,369 21,500Natural resources and

environmental protection 17,014 45,334 308,890 12,451Public protection and regulation 87,134 83,516 93,172 92,806Transportation 299,446 269,701 238,296 249,231

Operating Grants and Contributions 9,270,753 8,211,316 6,294,292 6,381,991 Capital Grants and Contributions 865,320 801,353 806,675 836,370Total Governmental Activities 11,502,811 10,477,543 8,584,816 8,421,022

Business-Type Activities: Charges for Services:

State Parks 47,931 49,016 48,774 50,064Kentucky Lottery CorporationKentucky Horse Park 12,407 10,679 9,981 9,161Insurance Administration 124,106 113,248 112,177 122,962Kentucky Public Employees' Health Plan 1,712,136 1,692,801 1,680,011 1,681,642Unemployment Compensation 743,369 561,692 532,298 521,893

Operating Grants and Contributions 174,235 408,125 705,465 Capital Grants and Contributions 149 378 155 1,032

Total Business-Type Activities 2,640,098 2,602,049 2,791,521 3,092,219Total Primary Government $ 14,142,909 $ 13,079,592 $ 11,376,337 $ 11,513,241

ExpensesPrimary Government: Governmental Activities:

General government $ 2,557,827 $ 2,840,370 $ 3,333,535 $ 3,002,882Legislative and judicial 433,354 420,929 406,949 411,579Commerce 110,041 112,067 112,296 132,078Education and humanities 5,822,980 5,539,119 5,214,551 5,818,383Human Resources 11,098,078 10,000,356 7,618,717 7,623,348Justice 952,071 933,126 936,118 923,628Natural resources and

environmental protection 190,532 192,059 229,245 221,822Public protection and regulation 107,258 92,798 160,071 156,755Transportation 1,819,570 2,127,851 1,720,513 1,496,753Interest expense 341,922 355,842 369,773 403,534

Total Governmental Activities 23,433,633 22,614,517 20,101,768 20,190,762

Business-Type Activities:State Parks 110,220 96,587 92,724 93,925Kentucky Lottery CorporationKentucky Horse Park 19,278 19,511 15,856 13,970Insurance Administration 116,723 86,063 93,876 38,081Kentucky Public Employees' Health Plan 1,420,292 1,642,048 1,677,143 1,687,322Unemployment Compensation 340,223 1,092,231 1,287,408 1,193,572

Total Business-Type Activities 2,006,736 2,936,440 3,167,007 3,026,870Total Primary Government $ 25,440,369 $ 25,550,957 $ 23,268,775 $ 23,217,632

Net (Expense)/Revenue Governmental Activities $ (11,930,822) $ (12,136,974) $ (11,516,952) $ (11,769,740)Business-Type Activities 633,362 (334,391) (375,486) 65,349Total Primary Government Net Expense $ (11,297,460) $ (12,471,365) $ (11,892,438) $ (11,704,391)

241 Continued

2011 2010 2009 2008 2007 2006

$ 438,993 $ 384,050 $ 366,634 $ 494,587 $ 375,662 $ 374,65521,177 20,226 28,561 15,225 14,558 13,66736,774 40,657 47,770 41,821 42,267 34,39078,996 55,926 50,988 68,609 85,538 102,783

484,958 103,025 121,752 200,913 197,556 106,23822,121 21,641 20,611 24,096 22,189 33,185

43,338 41,123 35,959 42,511 39,412 33,20583,816 73,066 71,078 66,495 64,260 63,341

218,846 230,918 238,110 16,849 215,869 202,5697,071,327 7,621,275 6,575,144 5,554,089 5,261,989 5,139,428

697,927 773,661 550,416 750,184 658,132 597,2829,198,273 9,365,568 8,107,023 7,275,379 6,977,432 6,700,743

49,437 50,802 52,439 57,605 56,208 52,751772,349 772,497 810,544 778,211 744,222 742,312

7,798 6,880 6,423 6,763 6,632 6,010110,829 121,445 93,438 129,870 130,994 178,305

1,752,908 1,548,458 1,392,971 1,270,899 1,158,078 595,435471,876 1,556,290 412,430 381,410 357,396 377,265953,112 3,849 363,028 53,838 46,798 45,573

2,326 4,633 1,735 476 1124,120,635 4,060,221 3,135,906 2,680,331 2,500,804 1,997,763

$ 13,318,908 $ 13,425,789 $ 11,242,929 $ 9,955,710 $ 9,478,236 $ 8,698,506

$ 3,212,093 $ 4,377,373 $ 3,837,639 $ 4,370,883 $ 3,708,700 $ 2,714,165400,786 376,743 360,872 335,635 313,010 305,466113,156 124,263 112,825 107,774 96,486 103,996

6,036,864 5,148,482 4,887,919 4,852,742 4,608,914 4,421,8127,652,130 7,725,161 7,611,725 6,904,568 6,468,225 6,259,383

887,611 876,065 822,301 845,153 803,120 794,698

198,067 192,518 197,086 197,265 191,052 207,369164,052 113,558 121,952 97,360 116,770 68,108

1,340,012 1,175,210 1,331,764 1,170,102 1,123,493 1,263,891377,725 332,639 265,984 254,488 266,388 250,622

20,382,496 20,442,012 19,550,067 19,135,970 17,696,158 16,389,510

92,777 101,861 98,795 104,672 111,973 90,283566,117 568,183 619,902 599,490 563,549 558,435

14,804 13,521 11,411 12,799 10,624 9,690232,100 107,286 (18,953) 117,817 176,338 70,683

1,624,444 1,497,656 1,434,951 1,288,981 1,152,794 507,2821,521,994 1,958,414 1,317,067 493,397 450,629 396,0524,052,236 4,246,921 3,463,173 2,617,156 2,465,907 1,632,425

$ 24,434,732 $ 24,688,933 $ 23,013,240 $ 21,753,126 $ 20,162,065 $ 18,021,935

$ (11,184,223) $ (11,076,444) $ (11,443,044) $ (11,860,591) $ (10,718,726) $ (9,688,767)68,399 (186,700) (327,267) 63,175 34,897 365,338

$ (11,115,824) $ (11,263,144) $ (11,770,311) $ (11,797,416) $ (10,683,829) $ (9,323,429)

242

COMMONWEALTH OF KENTUCKYGOVERNMENT-WIDE EXPENSES, PROGRAM REVENUES, AND NET (EXPENSE)/REVENUEFOR THE LAST TEN FISCAL YEARS(Expressed in Thousands)

2015 2014 2013 2012General Revenues and

Other Changes in Net PositionGovernmental Activities:Taxes:

Sales and gross receipt $ 5,714,300 $ 5,575,312 $ 5,292,465 $ 5,505,336Individual income 4,064,705 3,752,868 3,748,008 3,474,027Corporate income 540,132 456,601 423,093 370,485Property 570,998 553,339 556,986 534,189License and privilege 13,742 21,170 21,091 26,792Severance 235,068 251,231 461,866 170,980Inheritance and estate 52,616 51,513 20,503 68,119Miscellaneous taxes 190,700 184,605 203,467 148,305

Unrestricted grants and contributions 10,348 12,663 16,332 14,640Unrestricted investment earnings 4,264 (37) 2,179 (21,439)Gain on sale of capital assets 7,259 10,969 8,885 10,363Miscellaneous general 413,140 496,504 544,186 493,133Transfers 108,470 (4,214) (22,093) (12,293)

Total General Revenues and Transfers 11,925,742 11,362,524 11,276,968 10,782,637Change in Net Position (5,080) (774,450) (239,984) (987,103)

Net Position at July 1, as Restated (14,136,431) 11,047,559 11,287,532 12,352,067Net Position at June 30 $ (14,141,511) $ 10,273,109 $ 11,047,548 $ 11,364,964

Business-Type Activities:Unrestricted grants and contributions $ $ $ $Unrestricted investment earnings 14,971 13,546 (16,154)Gain on sale of capital assets 32 55,123Miscellaneous general 5,693 648,434 501,411Transfers (108,470) 4,214 22,093

Total General Revenues and Transfers (87,806) 666,226 507,350 55,123Change in Net Position 545,556 331,835 131,864 192,756

Net Position at July 1, as Restated (433,313) (546,982) (678,846) (871,602)Net Position at June 30 $ 112,243 $ (215,147) $ (546,982) $ (678,846)

Change in Net PositionGovernmental Activities $ (5,080) $ (774,450) $ (239,984) $ (987,103)Business-Type Activities 545,556 331,835 131,864 192,756

Total Primary Government Changesin Net Position $ 540,476 $ (442,615) $ (108,120) $ (794,347)

NOTE: This schedule is presented on the accrual basis of accounting.

243

2011 2010 2009 2008 2007 2006

$ 5,152,345 $ 4,880,831 $ 4,777,321 $ 4,828,223 $ 4,623,126 $ 4,433,8933,451,268 3,125,824 3,359,471 3,512,908 2,975,875 2,863,269

317,578 235,654 278,103 397,842 961,204 1,013,768509,961 504,189 534,441 497,326 503,853 492,532

29,690 29,198 37,442 33,049 42,738 73,679366,633 325,077 362,965 310,294 279,924 290,203

45,144 38,058 43,237 51,423 49,574 40,498168,847 152,016 146,977 163,842 164,715 161,663

14,071 9,365 10,263 11,923 731 7237,146 9,531 (9,977) 31,335 57,070 58,4289,727 22,682 12,730 10,123 3,288 4,637

444,309 388,144 319,408 596,079 421,772 499,657206,078 172,007 264,032 126,716 169,150 187,101

10,722,797 9,892,576 10,136,413 10,571,083 10,253,020 10,120,051(461,426) (1,183,868) (1,306,631) (1,289,508) (465,706) 431,284

12,830,250 14,005,048 16,086,764 17,525,035 17,842,898 17,387,699$ 12,368,824 $ 12,821,180 $ 14,780,133 $ 16,235,527 $ 17,377,192 $ 17,818,983

$ 208 $ $ $ $ $56,203 47,657 (28,261) 16,531 83,846 26,793

597 1,844 38 59 72 3021,902 35,792 48,894 18,746 8,628 25,900

(206,078) (172,007) (264,032) (126,716) (169,150) (187,101)(127,168) (86,714) (243,361) (91,380) (76,604) (134,378)

(58,769) (273,414) (570,628) (28,205) (41,707) 230,960(789,694) (526,859) 46,549 74,791 34,159 (196,801)

$ (848,463) $ (800,273) $ (524,079) $ 46,586 $ (7,548) $ 34,159

$ (461,426) $ (1,183,868) $ (1,306,631) $ (1,289,508) $ (465,706) $ 431,284(58,769) (273,414) (570,628) (28,205) (41,707) 230,960

$ (520,195) $ (1,457,282) $ (1,877,259) $ (1,317,713) $ (507,413) $ 662,244

244

COMMONWEALTH OF KENTUCKYPERSONAL INCOME TAX INFORMATIONCALENDAR YEARS 2004 and 2013

Personal Income Tax Filers and Liability by Income Level ( C )

Ky Federal AGI ( from Ky form 740) Income Level Number of Filers

Percentage of Total

Percentage of Total

Resident Taxpayerless than $25,001 734,130 42.07% $ 225,514,228 6.53%$25,001-$50,000 419,941 24.07% 539,579,669 15.65%$50,001-$100,000 390,859 22.40% 1,010,739,398 29.31%$100,001-$200,000 160,383 9.19% 851,611,670 24.69%$200,001-$500,000 32,655 1.87% 445,733,015 12.93%Greater than $500,000 6,784 0.39% 375,418,996 10.89%

Total Resident 1,744,752 100.00% 3,448,596,976 100.00%

Non-Resident Taxpayerless than $25,001 60,119 37.51% 6,479,848 3.28%$25,001-$50,000 28,423 17.73% 14,868,656 7.52%$50,001-$100,000 29,685 18.52% 27,353,892 13.84%$100,001-$200,000 19,424 12.12% 30,027,584 15.19%$200,001-$500,000 11,605 7.24% 27,832,584 14.08%Greater than $500,000 11,017 6.87% 91,140,116 46.10%

Total Non-Resident 160,273 100.00% 197,702,680 100.00%

Totals 1,905,025 $ 3,646,299,656

Personal Income Tax RatesTax Years 2004 - 2013

Tax Rate 2% 3% 4% 5%Income Bracket $0-3,000 $3,001-4,000 $4,001-5,000 $5,001-8,000

2013 2004

Personal Income Tax Revenue $ 3,646,299,656 (A) $ 2,876,262,504 Personal Income 111,991,000,000 (B) 85,484,500,000Average Effective Rate 3.3% 3.4%

Source of Tax Information:(A) Kentucky Department of Revenue(B) See Schedule of Personal Income (C) This information is presented on a cash basis.

Personal Income Tax Liability

Calendar Year 2013

245

Number of Filers Percentage of TotalPersonal Income Tax

Liability Percentage of Total

775,013 47.40% $ 201,638,526 7.33%408,347 24.98% 541,863,564 19.69%341,805 20.90% 939,466,043 34.14%

86,695 5.30% 495,324,582 18.00%18,614 1.14% 275,563,177 10.01%

4,598 0.28% 297,947,095 10.83%1,635,072 100.00% 2,751,802,987 100.00%

Number of Filers Percentage of TotalPersonal Income Tax

Liability Percentage of Total47,402 40.54% 4,684,388 3.76%22,101 18.90% 11,547,473 9.28%20,406 17.45% 19,465,682 15.64%11,454 9.80% 19,002,252 15.27%

7,270 6.22% 17,271,153 13.88%8,294 7.09% 52,488,569 42.17%

116,927 100.00% 124,459,517 100.00%

1,751,999 $ 2,876,262,504

5.8% 6.0%$8,001 -75,000 $75,001 and UP

Calendar Year 2004

247

COMMONWEALTH OF KENTUCKYASSESSED AND ESTIMATED ACTUAL VALUE OF TAXABLE PROPERTYFOR CALENDAR YEARS 2005-2014(Expressed in Thousands, Except Ratio Data)

Ratio of TotalAssessed

Real Property Personal Property Totals to TotalFor the Estimated Estimated Estimated Estimated

Year Ended Assessed Actual Assessed Actual Assessed Actual ActualDecember 31 Value Value Value Value Value Value Value

2005 $ 183,052,164 $ 194,736,345 $ 198,811,311 $ 198,811,311 $ 381,863,475 $ 393,547,656 97.0%2006 195,349,504 207,818,621 146,437,150 146,437,150 341,786,654 354,255,771 96.5%2007 209,408,191 222,774,671 155,998,799 155,998,799 365,406,990 378,773,470 96.5%2008 219,881,174 233,916,143 160,465,814 160,465,814 380,346,988 394,381,957 96.4%2009 226,213,765 240,652,941 160,898,648 160,898,648 387,112,413 401,551,589 96.4%2010 226,833,829 241,312,584 169,307,231 169,307,231 396,141,060 410,619,815 96.5%2011 229,344,568 243,983,583 169,933,206 169,933,206 399,277,774 413,916,789 96.5%2012 232,286,735 247,113,548 176,724,331 176,724,331 409,011,066 423,837,879 96.5%2013 233,534,113 248,440,546 173,138,368 173,138,368 406,672,481 421,578,914 96.5%2014 237,120,455 252,255,803 174,481,430 174,481,430 411,601,885 426,737,233 96.5%

SOURCE: Kentucky Department of RevenueNOTE: Assessed values are established through the utilization of an annual ad valorem tax based on the fair value of property.

COMMONWEALTH OF KENTUCKYPROPERTY TAX LEVIES AND COLLECTIONSFOR CALENDAR YEARS 2005-2014(Expressed in Thousands, Except Percentages)

Percent of Total WeightedFor the Year Total Current Tax Percent of Levy Delinquent Tax Total Tax Tax Collections Average

Ended June 30 Levied Collections Collected Collections Collections to Tax Levy State Rate **2005 $ 505,847 $ 451,949 89.3% $ 23,632 $ 475,581 94.0% 71.122006 483,608 467,209 96.6% 16,299 * 483,508 100.0% 65.052007 513,301 483,127 94.1% 17,520 500,647 97.5% 66.452008 527,149 490,176 93.0% 22,946 513,122 97.3% 65.262009 530,822 491,218 92.5% 24,952 516,170 97.2% 64.262010 536,828 486,675 90.7% 28,141 514,816 95.9% 65.352011 545,501 512,879 94.0% 16,688 529,567 97.1% 66.272012 561,041 531,406 94.7% 26,972 558,378 99.5% 66.012013 566,500 541,152 95.5% 21,277 562,429 99.3% 64.982014 575,958 547,198 95.0% 16,237 563,435 97.8% 64.37

SOURCE: Kentucky Department of RevenueNOTE: Property taxes are assessed as of January 1 of each year in one of two ways: 1) by the 120 Property Valuation

Administrators within the State, or 2) by the Revenue Cabinet. The tax rates are set by the various taxing jurisdictionsand applied to the particular assessment. Tax bills are delivered by September 15 of each year. Also, the "Total Tax Levy" in this table has been re-specified for the years shown to adjust for the fact that the receipts for motor vehicles involve two different assessment years.

* Delinquent tax collections in excess of the current year levy have been allocated to prior years.

** The weighted average state rate includes state and local rates and are expressed in cents per $100 of assessed value.

248

COMMONWEALTH OF KENTUCKYRATIOS OF OUTSTANDING DEBT BY TYPEFOR THE LAST TEN FISCAL YEARS(Expressed in Thousands, Except Ratio Data)

2015 2014 2013 2012Governmental Activities Debt

Revenue Bonds (2) $ 6,154,942 $ 6,291,646 $ 6,427,591 $ 6,555,730Notes (2) 1,467,573 1,868,377 1,648,642 1,669,372Capital Leases (2) 71,493 55,444 211,963 46,069

Total Government Activities Debt 7,694,008 8,215,467 8,288,196 8,271,171

Business-Type Activities DebtCapital Leases (2) 12,262 13,065 1,153,410 14,119

Total Business-Type Activities Debt 12,262 13,065 1,153,410 15,291

Total Primary Government Debt $ 7,706,270 $ 8,228,532 $ 9,441,606 $ 8,286,462

Total Debt RatiosRatio of Total Debt to Personal Income 6.67% 7.35% 8.74% 7.97%

Total Debt Per Capita (1) $ 1,753.30 $ 1,872.12 $ 2,160.87 $ 1,896.50

Net Bonded DebtGross Bonded Debt $ 6,154,942 $ 6,291,646 $ 6,427,591 $ 6,555,730Less: Debt Service Funds 138,192 125,732 124,951 120,304

Net Bonded Debt $ 6,016,750 $ 6,165,914 $ 6,302,640 $ 6,435,426

Net Bonded Debt RatiosRatio of Net Bonded Debt to

Governmental Funds Revenues 26.97% 27.64% 31.14% 32.81%

Net Bonded Debt Per Capita (1) $ 1,373.56 $ 1,407.61 $ 1,438.82 $ 1,472.85

(1) Per Capita calculations are based on the population figures for the prior year. (See Demographics Schedule on page 250)(2) See Note 15 for Debt Amounts

249

2011 2010 2009 2008 2007 2006

$ 6,241,628 $ 5,959,846 $ 4,429,520 $ 3,617,080 $ 3,442,634 $ 3,546,4681,715,915 1,089,740 1,059,520 1,516,350 910,310 554,790

30,877 32,341 26,638 30,968 39,079 28,4507,988,420 7,081,927 5,515,678 5,164,398 4,392,023 4,129,708

3,542 127 211 212 197 3073,542 127 211 212 197 307

$ 7,991,962 $ 7,082,054 $ 5,515,889 $ 5,164,610 $ 4,392,220 $ 4,130,015

7.81% 7.09% 5.45% 5.21% 4.64% 4.54%

$ 1,838.81 $ 1,641.60 $ 1,292.01 $ 1,217.65 $ 1,044.26 $ 989.60

$ 6,241,628 $ 5,959,846 $ 4,429,520 $ 3,617,080 $ 3,442,634 $ 3,546,468137,921 197,802 353,391 405,028 415,386 403,002

$ 6,103,707 $ 5,762,044 $ 4,076,129 $ 3,212,052 $ 3,027,248 $ 3,143,466

31.11% 29.54% 22.22% 17.97% 17.77% 18.45%

$ 1,404.36 $ 1,335.63 $ 954.77 $ 757.30 $ 719.73 $ 753.21

250

TOP 10 MANUFACTURERS/SUPPORTIVE SERVICE FIRMS(Ranked by Number of Employees)CURRENT YEAR AND NINE YEARS AGO

Number Percentage Number Percentageof of Total of of Total

Company Employees Rank Employment Employees Rank EmploymentUnited Parcel Service, Inc. 12,961 1 0.69% 10,788 1 0.56%Humana Inc. 11,464 2 0.61% 7,304 4 0.38%Toyota Motor Corp 11,078 3 0.59% 8,731 3 0.46%Ford Motor Co. 8,491 4 0.45% 9,500 2 0.50%Amazon.com 7,232 5 0.39%General Electric Co 6,843 6 0.36% 6,968 5 0.36%FMR LLC 3,900 7 0.21%Xerox Coporation 3,837 8 0.20%Citigroup 3,099 9 0.17% 3,700 9 0.19%Berkshire Hathaway Inc. 2,620 10 0.14%Delta Air Lines, Inc 4,900 6 0.26%Dana Corp. 4,676 7 0.24%Johnson Controls, Inc. 4,198 8 0.22%Lexmark International, Inc 3,450 10 0.18%

71,525 3.81% 64,215 3.36%SOURCE:

http://www.thinkkentucky.comhttp://www.workforcekentucky.ky.gov

2015 2006

DEMOGRAPHIC STATISTICSFOR CALENDAR YEARS 2005-2014

For the Year Estimated Per Capita UnemploymentEnded December 31 Population Income Rate

2005 4,173,405 $ 28,513 5.9%2006 4,206,074 29,352 5.7%2007 4,241,474 31,111 5.4%2008 4,269,245 31,826 6.4%2009 4,314,113 32,306 10.3%2010 4,346,266 32,376 10.2%2011 4,369,356 33,667 9.4%2012 4,380,415 35,041 8.2%2013 4,395,295 36,214 8.0%2014 4,413,457 37,654 6.5%

SOURCE: http://www.bea.gov https://kylmi.ky.gov

COMMONWEALTH OF KENTUCKYUNIVERSITY AND COLLEGE REVENUE BOND COVERAGEFOR THE LAST TEN FISCAL YEARS(Expressed in Thousands, Except Ratio Data)

Fiscal YearEnding June 30

2006 $ 499,346 * $ 57,141 8.742007 613,592 * 43,071 14.252008 235,398 * 47,782 4.932009 231,058 * 55,549 4.162010 308,774 * 61,448 5.022011 418,370 * 56,920 7.352012 3,930,749 ** 1,531,031 2.572013 4,031,429 ** 1,485,309 2.712014 4,235,184 ** 1,777,303 2.382015 4,598,823 ** 1,958,552 2.35

SOURCE: Commonwealth of Kentucky Comprehensive AnnualFinancial Reports; State universities' audited financial statements* Calculated using net operating revenue and short-term bond liabilty** Caluated using Gross revenue stream, state appropriation, current and long term bond liablity

Coverage Ratio

Revenue StreamAvailable For Debt Service

Debt Service Requirement

251

COMMONWEALTH OF KENTUCKYSOURCES OF PERSONAL INCOMEFOR CALENDAR YEARS 2005-2014(Expressed in Thousands, Except Percent Data)

Source Amount Percent Amount Percent Amount Percent Amount Percent Amount PercentFarm $ 1,520,500 1.7% $ 532,750 0.6% $ 1,040,750 1.0% $ 932,500 0.9% $ 1,364,000 1.4%Agriculture services,

forestry, fisheries and others 369,750 0.4% 422,500 0.4% 407,250 0.4% 421,500 0.4% 319,250 0.3%

Mining 1,879,750 2.1% 2,128,750 2.3% 2,227,000 2.2% 2,475,000 2.4% 2,121,000 2.1%Manufacturing 16,364,000 18.0% 17,033,000 18.0% 17,069,000 17.2% 16,305,750 16.1% 13,446,500 13.5%Construction 5,133,750 5.6% 5,225,750 5.5% 5,292,750 5.3% 5,356,750 5.3% 5,045,000 5.1%Wholesale and retail

trade 10,857,250 11.9% 11,430,750 12.1% 11,726,500 11.8% 11,870,500 11.8% 11,548,500 11.6%Finance, insurance and

real estate 5,487,250 6.0% 5,922,750 6.3% 6,345,250 6.4% 6,390,750 6.3% 5,979,500 6.0%Transportation and

public utilities 5,452,500 6.0% 5,653,750 6.0% 6,237,000 6.3% 6,008,000 5.9% 6,062,250 6.1%Services 26,222,250 28.9% 27,810,500 29.3% 29,033,250 29.4% 30,718,250 30.4% 31,714,500 31.6%Government and

government enterprises 17,594,750 19.4% 18,420,500 19.5% 19,826,000 20.0% 20,809,250 20.5% 22,249,500 22.3%

Earnings by Place of Work $ 90,881,750 100.0% $ 94,581,000 100.0% $ 99,204,750 100.0% $ 101,288,250 100.0% $ 99,850,000 100.0%

Source Amount Percent Amount Percent Amount Percent Amount Percent Amount PercentFarm $ 1,208,000 1.2% $ 811,000 0.8% $ 1,062,000 1.0% $ 1,954,000 1.7% $ 1,790,189 1.5%Agriculture services,

forestry, fisheries and others 316,000 0.3% 280,000 0.3% 330,000 0.3% 346,000 0.3% 399,410 0.3%

Mining 2,353,000 2.3% 2,256,000 1.3% 2,224,000 1.3% 1,853,000 1.7% 1,808,635 1.6%Manufacturing 14,293,000 14.0% 12,563,000 12.2% 15,736,000 15.4% 15,937,000 14.2% 16,681,907 14.4%Construction 4,726,000 4.6% 5,101,000 5.0% 5,568,000 5.4% 5,938,000 5.3% 6,662,114 5.8%Wholesale and retail

trade 11,456,000 11.2% 12,021,000 11.7% 12,306,000 12.0% 12,328,000 11.0% 12,726,539 11.0%Finance, insurance and

real estate 5,956,000 5.8% 6,507,000 6.3% 6,931,000 6.8% 7,269,000 6.5% 7,567,461 6.6%Transportation and

public utilities 6,130,000 6.0% 6,199,000 6.1% 6,529,000 6.4% 6,402,000 5.7% 6,745,081 5.8%Services 32,939,000 32.1% 34,521,000 33.1% 34,471,000 33.1% 36,784,000 32.9% 38,137,251 33.0%Government and

government enterprises 23,014,000 22.5% 23,727,000 23.2% 22,879,000 22.3% 23,180,000 20.7% 22,994,107 19.9%

Earnings by Place of Work $ 102,391,000 100.0% $ 103,986,000 100.0% $ 108,036,000 100.0% $ 111,991,000 100.0% $ 115,512,694 100.0%

SOURCE: U.S. Department of Commerce, Bureau of Economic Analysis (http://www.bea.gov)NOTE: Percentages may not add to 100% due to rounding.

* 2002 annual estimates computed with BEA table SQ5 by adding 4 quarters of 2002 and dividing by 4. ** Annual estimates computed with BEA table SQ5N by adding 4 quarters of each year and dividing by 4.

Quarterly charts show each quarter as an annualized amount based on amounts to date. Amounts are based on the North American Industry Classification System (NAICS) instead of the

Standard Industrial Classification (SIC) system used in previous years. This affects comparability of amounts.NAICS will be used in the future fiscal years.

2005**

2010** 2014**

2009**

2012** 2013**

2006**

2011**

2007** 2008**

252

COMMONWEALTH OF KENTUCKYOPERATING INDICATORS BY FUNCTIONLAST TEN FISCAL YEARS

2015 2014 2013 2012 2011 2010 2009 2008 2007 2006PersonnelNumber of Full Time Employees-

Executive Branch 32,547 31,819 31,961 32,270 32,365 32,309 31,334 33,851 33,204 34,947Health Insurance Expenditures -

Percentage Increase/(decrease) 2.5% 2.0% 7.4% (3.5%) 4.5% 18.7% (1.3%) 6.1% (1.8%) 29%

EducationK-12 Enrollment 680,519 678,884 677,394 647,827 644,963 636,188 671,147 671,542 668,337 664,606K-12 Attendance Rate 94.50% 94.60% 94.52% 94.05% 94.05% 94.18% 94.17% 94.18% 94.60% 94.31%K-12 Graduation Rate 87.90% 87.40% 86.10% 76.68% 80.5%*** 83.91% 84.52% 83.72% 83.26% 82.84%Statewide Academic Index * * * * * * * 82.20% 81.80% 78.30%Average ACT Score 20 19.9 19.6 19.8 19.6 19.4 19.4** 20.9 20.7 20.6GED Graduates 1,663 7,083 8,890 9,469 10,294 9,357 9,382 10,307 9,757 9,054College Going Rate for 9th Graders NA 47% 39% 42% 42% 42% 44% 38% 38% 37%Postsecondary Education Enrollment 215,509 220,963 225,415 235,833 232,318 223,893 211,179 212,994 206,419 202,197Bachelor's and Higher Degrees Awarded 32,706 32,374 32,237 30,034 29,911 28,798 27,983 27,246 27,042 26,544

Justice and Public SafetyIncarcerated Population-Daily Average 21,576 20,814 21,785 21,471 20,785 20,798 21,470 22,219 20,772 19,943Probation and Parole Population - Daily Average 46,008 45,755 43,196 41,790 41,534 39,364 38,933 39,206 33,642 33,643

Health and Family ServicesMedicaid Enrollment-Average 1,243,432 997,556 829,826 825,648 815,460 788,236 748,296 722,559 710,000 699,595Food Stamp Recipents-Monthly Average 788,485 843,164 869,035 843,939 814,176 761,654 680,087 623,997 595,366 598,486Temporary Assistance for Needy

Families (TANF)-Monthly Average 42,995 47,996 49,148 48,817 50,583 48,894 48,368 48,743 68,260 69,696Children with substantiated incidences 19,858 15,193 17,884 15,699 15,721 15,092 14,475 15,196 15,500 15,526

Environmental and Public ProtectionAir Pollution Source Inspections 3,448 3,939 3,919 3,355 3,390 5,910 3,085 4,310 4,000 4,600Waste Management Inspections 6,866 6,484 6,239 6,062 6,155 7,060 6,731 6,443 7,500 7,200Acres of Land Reforested 5,472 3,573 8,309 10,396 4,827 4,520 5,580 5,105 2,000 1,600Mine Permits Issued 446 515 606 719 691 608 688 848 954 1,025Mine Reclamation and Enforcement

Inspections 20,011 21,450 23,003 26,942 25,392 25,686 24,890 26,062 22,898 22,001Mine Safety-Completed Inspections 2,651 3,023 3,546 3,203 3,102 4,611 2,888 2,718 2,364 2,500

TransportationPercentage of Total Road System

Needing Improvement 17% 19% 19% 19% 15% 18% 14% 15% 15% 14%Statewide Road Maintainance

Rating (Target Score = 80) 83.7 82.5 80.5 80.1 81.5 79.7 80.9 81.7 80.1 79.1Daily Miles Traveled-Percentage

Changed (as compared to 2005 Data) (0.31%) (2.09%) (1.98%) 0.17% 0.20% (0.1%) 0.0% (0.5%) 0.1% (0.3%)State-Maintained Lane Miles-

Annual Percent Change 0.13% 0.33% 0.03% 0.10% 0.30% 0.10% 1.6% 0.6% 0.2% 0.2%Kentucky Road Construction Cost

Index-Percent Increase (1987 Base Year) 45.4% 43.6% 34.9% 10.7% 35.2% 13.9% 22.7% 28.0% 32.0% 19.5%

* The Statewide Academic Index is no longer generated.** First graduating class in which all students were required to take the ACT. A reduction was expected. ***First year using Average Freshman Graduation RateNA Information is not available

253

COMMONWEALTH OF KENTUCKYCAPITAL ASSET STATISTICS BY FUNCTIONFOR THE LAST TEN FISCAL YEARS

2015 2014 2013 2012 2011 2010 2009 2008 2007 2006General Government

Number of Buildings 312 312 313 310 292 326 309 558 566 297Number of Vehicles 299 303 305 377 394 365 356 411 487 258Land (Acres) 15,264 15,263 15,251 15,041 14,968 14,614 14,293 13,352 14,108 13,294

CommerceNumber of Resort Parks 17 17 17 17 17 17 17 17 17 17Number of Recreation Parks 23 21 21 21 23 23 24 24 24 24Number of Historic Sites 11 11 11 9 10 10 11 11 11 10Area of State Parks (Acres) 45,409 45,180 45,180 45,180 42,397 42,035 42,597 42,428 42,428 45,137

Education and HumanitiesNumber of Buildings 65 65 65 65 66 73 72 70 69 70Number of Vehicles 64 68 83 89 105 101 113 123 134 209Land (Acres) 385 387 387 387 388 388 388 372 388 388

Human ResourcesNumber of Buildings 160 182 182 182 182 200 196 196 193 190Number of Vehicles 19 18 24 23 45 46 40 150 165 215Land (Acres) 1,206 1,206 1,206 1,206 1,206 1,206 1,206 1,007 1,206 1,206

JusticeNumber of Buildings 447 449 452 459 465 508 479 482 449 440Number of Vehicles 1,720 1,715 1,753 2,043 2,102 1,863 1,861 1,696 1,668 3,911Land (Acres) 8,735 8,735 8,735 8,685 8,865 8,867 8,903 6,166 5,314 9,044

Natural Resources andEnvironmental ProtectionNumber of Buildings 22 20 20 20 21 26 26 26 27 25Number of Vehicles 807 797 793 847 827 916 815 847 1319 2622Land (Acres) 66,187 65,609 64,585 62,661 60,003 59,149 58,325 51,175 50,983 64,134

Public Protection and RegulationNumber of Vehicles 146 140 149 132 118 121 90 76 86 44

TransportationNumber of Lane Miles -State

Maintained Highways 64,187 63,407 63,196 63,175 63,135 62,913 62,823 62,419 62,071 62,193Number of State maintained Bridges 9,011 9,000 8,976 8,972 8,957 8,933 8,870 8,842 8,974 8,974Land (Acres) 1,656 1,700 1,653 1,653 1,653 1,981 1,981 1,977 1,977 1,961

254

COMMONWEALTH OF KENTUCKYOPERATING INFORMATIONSTATE GOVERNMENT EMPLOYEES BY FUNCTIONFOR THE LAST TEN FISCAL YEARS

2015 2014 2013 2012FULL-TIME EMPLOYEES

FUNCTIONGeneral government 4,671 4,775 5,089 4,669 Legislative and judicial 3,578 3,540 4,159 3,503 Commerce 1,633 1,699 1,520 1,914 Education and humanities 2,613 2,671 2,671 2,701 Human resources 7,466 7,523 7,470 7,481 Justice 7,832 7,896 8,054 8,070 Natural resources and environmental protection 1,387 1,445 1,608 1,614 Public protection and regulation 1,124 1,120 1,034 1,097 Transportation 4,629 4,650 4,690 4,682

Total full-time employees 34,933 35,319 36,295 35,731

PART-TIME and TEMPORARY EMPLOYEES

FUNCTIONGeneral government 650 662 649 663 Legislative and judicial 421 445 426 484 Commerce 479 494 488 498 Education and humanities 200 212 211 227 Human resources 123 137 126 119 Justice 16 19 21 24 Natural resources and environmental protection 13 13 18 26 Public protection and regulation 17 14 18 20 Transportation 77 68 88 40

Total part-time and temporary employees 1,996 2,064 2,045 2,101

Total Employees 36,929 37,383 38,340 37,832

255

2011 2010 2009 2008 2007 2006

4,738 4,841 4,706 4,855 4,984 5,0043,502 3,597 3,759 3,730 3,626 3,4451,972 2,023 2,038 2,141 2,155 2,2122,696 2,712 2,760 2,967 2,984 2,9067,517 7,482 7,182 7,387 7,751 8,4118,016 7,938 7,955 8,090 7,967 7,9321,648 1,675 1,649 1,601 1,673 1,6591,113 1,127 1,102 1,208 1,194 1,1994,670 4,713 4,467 4,549 4,711 4,715

35,872 36,108 35,618 36,528 37,045 37,483

657 662 659 649 757 781476 483 539 574 554 583384 1,376 1,496 1,506 1,548 1,516198 306 219 228 281 306108 124 91 71 165 114

26 39 27 58 33 5031 56 31 27 67 5430 31 14 15 54 34

138 133 129 156 202 1652,048 3,210 3,205 3,284 3,661 3,603

37,920 39,318 38,823 39,812 40,706 41,086

256

ACKNOWLEDGMENTS

The Commonwealth of Kentucky’s Comprehensive Annual Financial Report was prepared by the Finance and Administration Cabinet, Office of the Controller, Office of Statewide Accounting Services, Financial Reporting Branch and the Fixed Assets Branch:

John Bailey Jackie Green

Dee Dee McCroskyJoe McDanielJason Mach

Kimberly Moore Anthony Murray

Phil NallyTommy Richie

Donald Sweasy

Special acknowledgment goes to:

All fiscal and accounting personnel throughout Kentucky State Government, along with the Auditor of Public Accounts' staff, whose dedicated efforts and cooperation contributed to the compilation of financial information that appears in the report.

The Kentucky Transportation Cabinet's Division of Graphic Design and Printing staff provided printing services.

for the fiscal year ended june 30, 2015 - financeky of the controller/2015cafr.pdf · report for...

Documents